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James Hyerczyk
JPY Notes
JPY Notes

The USD/JPY settled higher on Friday and in a position to continue to breakout to the upside. The catalyst behind the rally is a widening interest rate differential between U.S. Government bonds and Japanese Government bonds. Essentially, it is the divergence in monetary policies between the hawkish U.S. Federal Reserve and the dovish bank of Japan that is driving the price action.


Daily Technical Analysis

The main trend is up according to the daily swing chart. A trade through last week’s high at 113.710 will signal a resumption of the uptrend. The main trend will change to down on a trade through 112.555.

Today’s price action will be controlled by momentum. Currently the upside momentum is strong with buyers easily taking out previous resistance areas. If it continues then the rallies should get stronger, however, volatility will also increase. The only pattern that could stop this rally is a closing price reversal top. This pattern usually signals a shift in momentum to down.


Daily Technical Forecast

Based on Friday’s close at 113.685 and the upside momentum into the close, the direction of the USD/JPY on Monday is likely to be determined by trader reaction to the December 12, 2017 main top at 113.745.

Taking out 113.745 with conviction will indicate the buying is getting stronger. This could trigger an acceleration to the upside with the next target an uptrending Gann angle at 114.379. Crossing to the strong side of this angle will put the USD/JPY in an extremely bullish position with the next target the November 6, 2017 main top at 114.728.

The inability to overtake and sustain a rally over 113.745 will signal the presence of sellers. The first downside target is a steep short-term uptrending Gann angle at 113.555. Since the trend is up, we could see buyers step in on the first test of this angle.

If 113.555 fails as support then look for a steep drop into the next uptrending Gann angle at 113.055. Once again buyers could step in on a test of this angle. If it fails then the selling will rotate into the next potential support angle at 112.805. This is the last Gann angle support before the 112.555 main bottom.

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