Featured Trade: USD/JPY at key medium term support with minor bearish exhaustion signals

Watch the key medium-term support of 111.60/50 for USD/JPY

Short-term technical outlook on USD/JPY (Tues 16 Oct)

Key elements

  • The recent decline of close to 300 pips from its major range resistance of 114.10/55 in place since 10 May 2017 has reached a key medium-term support of 111.60/50.
  • The 111.60/50 key medium-term support is defined by a confluence of elements; the pull-back support of the former major descending trendline resistance from Jun 2015 high, lower boundary of the medium-term ascending channel in place since 26 Mar 2018 low and a Fibonacci retracement/projection cluster.
  • Momentum analyses suggest that at least a minor bearish exhaustion point has been reached. The daily RSI oscillator has managed to stage a rebound from its significant corresponding support at the 40%. Also, the shorter-term hourly RSI oscillator has staged a bullish breakout from its descending resistance at the 50% coupled with a prior bullish divergence signal that was flashed out at its oversold zone. These observation suggest that the downside momentum of the decline from 04 Oct 2018 high of 114.55 has stated to abate and a bullish presignal has been trigged for a potential bullish breakout of its minor price action descending trendline that is acting as a resistance at 112.25.
  • Intermarket analysis in conjunction with the current technical elements of the major stock indices that are also supporting the aforementioned bearish exhaustion view of the recent decline seen in the USD/JPY, the S&P 500 is now undergoing a potential residual push down to target the 2700/2690 support  from its minor “triangle range” configuration in motion since 11 Oct 2018 minor high of 2794 before a countertrend/corrective rebound to retrace the recent decline from 03 Oct 2018 all-time high level of 2940 (refer to this link on the details as per highlighted on our latest weekly technical outlook).
  • The intermediate resistances of the USD/JPY stands at 112.25 (minor descending trendline from 04 Oct 2018 high & 23.6% Fibonacci retracement of the decline from 04 Oct 2018 high to 15 Oct 2018 low), 112.80 (former minor swing low areas of 09/10 Oct 2018 & 50% Fibonacci retracement of the decline from 04 Oct 2018 high to 15 Oct 2018 low) and 113.30/40 next (minor swing high areas of 08/09 Oct 2018 & 61.8% Fibonacci retracement of the decline from 04 Oct 2018 high to 15 Oct 2018 low).

Key Levels (1 to 3 days)

Intermediate support: 111.85

Pivot (key support): 111.60/50

Resistances: 112.25 (trigger), 112.80 & 113.30/40

Next support: 109.70


Therefore as long as the 111.60/50 key medium-term pivotal support holds and a break with an hourly close above 112.25 is likely for the USD/JPY to shape a potential corrective rebound to target the resistances of 112.80 and 111.30/40.

On the other hand, failure to hold at 111.50 opens up scope for the continuation of the impulsive down move to towards the next support at 109.70 (see daily chart).

Charts are from eSignal

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (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.

For further details see our full non-independent research disclaimer and quarterly summary.