Short-term technical outlook on USD/JPY
Key technical elements
- The recent plunge of 2.8% from its 113.38 high of 08 Jan 2018 has started to stabilise as seen from the short-term 4 hour RSI oscillator.
- The 4 hour RSI oscillator, an indicator that measures momentum has flashed out a bullish divergence signal at its oversold region which suggests that the recent downside momentum of price action has abated.
- Since its 17 Jan 2018 swing low of 110.20, the pair has traced out an impending minor bullish reversal chart configuration, “Double Bottom” with its corresponding neckline resistance at 111.45 (see 1 hour chart).
- The next significant short-term resistance stands at 112.00/112.15 which is defined by the former medium-term swing low areas of 06 Dec/15 Dec 2017/02 Jan 2018 and Fibonacci cluster (0.618% retracement of the down move from 08 Jan 2018 high to 17 Jan 2018 low & the 1.236 projection of the recent up move from 17 Jan to 18 Jan 2018 projected from 19 Jan 2018 low).
- Based on the Elliot Wave Principal/fractal analysis, the pair is likely in the midst of undergoing a potential minor degree corrective rebound, wave iv before another downleg materialises.
Key levels (1 to 3 days)
Intermediate support: 110.80
Pivot (key support): 110.20
Resistances: 111.45 & 112.00/112.15
Next support: 109.00/108.70
Therefore as long as the 110.20 key short-term pivotal support holds, the USD/JPY is likely to see a further push up to retest 111.45 and a break above it opens up scope for a further potential corrective rebound to target the 112.00/112.15 resistance.
However, failure to hold above 110.20 should invalidate the corrective rebound scenario for an extension of the decline towards the major support zone of 109.00/108.70 (the ascending trendline from Jun/Aug 2016 & Fibonacci cluster).
Charts are from eSignal
GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.