USD/JPY Weekly Price Forecast – US dollar fails to break out for the week

The US dollar broke higher during the week, reaching towards the vital ¥114.50 level. This is an area that has been resistance more than once in the past, so it makes sense that we turned around and formed a shooting star. The shooting star of course is a very negative sign, and if we break down below the bottom of the shooting star, that is technically a sell signal. However, the ¥113 level underneath is of course previous resistance, so it should now be supported. The shooting star is typically a sell signal, but I recognize that there’s so much support underneath that it’s more than likely going to offer a value play more than anything else.

The massive candle before the shooting star of course gives me an inclination that there is a lot of demand underneath, and with the interest rate differential between the economies it makes sense that we would eventually break out to the upside. We had gotten a bit overbought though, so at this point I think that we need to pullback simply to build up the necessary momentum. Ultimately, this is a market that that should continue to be very bullish, but things can go straight up forever, and that’s simply what we are seeing in this pair. Once we break above the ¥114.50 level, then we take on the ¥115 level. A break above there is the next major leg up and would give us more of a “buy-and-hold” attitude.

USD/JPY Video 08.10.18