AUD/JPY, GBP/JPY, USD/JPY Key Levels

  


Japanese Yen, AUD/JPY, GBP/JPY, USD/JPY, IGCS – Talking Points:

  • Cycle analysis suggests the Japanese Yen may be at risk of extended losses against its major counterparts in the coming months.
  • AUD/JPY consolidating in a Rectangle pattern but is a Head and Shoulders pattern forming below key resistance?
  • GBP/JPY rates have stormed higher but is the recent move overextended?
  • USD/JPY poised to extend recent gains after slicing through key resistance.

The Japanese Yen has faced significant headwinds in recent weeks, as climbing sovereign bond yields put the carry-trade back in vogue. This dynamic looks set to endure over the near-term and may open the door to further losses for JPY. Here are the key levels for AUD/JPY, GBP/JPY and USD/JPY rates.

Majors-Based Japanese Yen Index Monthly Chart

Japanese Yen Price Forecast: AUD/JPY, GBP/JPY, USD/JPY Key Levels

Chart prepared by Daniel Moss, created with Tradingview

*JPY Index averages USD/JPY, AUD/JPY, EUR/JPY, GBP/JPY

The chart above highlights the cyclical pattern displayed by the Japanese Yen over the past 37 years, with the currency largely adhering to what appears to be an 8-and-a-half year rotation. JPY set significant bottoms against its major counterparts in late 1998, early 2007 and late 2015.

After bottoming out, the haven-associated currency then seems to outperform early in the cycle, with key highs posted roughly two years after the 1998 and 2007 lows.

Although the Yen soared to its initial cyclical high just 13 months after the start of the period, the development of price over the last five years looks strikingly similar to the previous bullish cycle.

With that in mind, the convincing break below uptrend support extending from the December 2014 low – combined with the RSI snapping its 73-month uptrend and sliding to its lowest levels in six years – may foreshadow extended losses for JPY in the coming months.

Cycle analysis suggests that the currency could fall an additional 25% from current levels before bottoming out in early 2024.

AUD/JPY Daily Chart – Rectangle Consolidation or Head and Shoulders Top?

Japanese Yen Price Forecast: AUD/JPY, GBP/JPY, USD/JPY Key Levels

Chart prepared by Daniel Moss, created with Tradingview

AUD/JPY rates have range traded for the majority of March, with psychological support at 82.00 and resistance at 85.00 containing price action within a Rectangle consolidation pattern.

Bullish moving average stacking, in combination with both the RSI and MACD tracking above their respective neutral midpoints, suggests that the path of least resistance is skewed to the topside.

However, price may also be in the process of carving out a bearish Head and Shoulders reversal pattern, with the inability to gain a firm foothold above the February high (84.95) leading to the formation of the pattern’s right shoulder.

This could foreshadow a change in trend for AUD/JPY and trigger a short-term pullback towards the 50% Fibonacci (82.32). Clearing that would bring former resistance-turned-support at the January high (80.93) into the crosshairs.

That being said, a daily close above 85.00 would refute this possibility and probably signal the resumption of the primary uptrend, with the next key resistance level coming in at the January 2018 low (87.21).

Japanese Yen Price Forecast: AUD/JPY, GBP/JPY, USD/JPY Key Levels

The IG Client Sentiment Report shows 35.60% of traders are net-long with the ratio of traders short to long at 1.81 to 1. The number of traders net-long is 2.66% lower than yesterday and 4.57% higher from last week, while the number of traders net-short is 11.82% higher than yesterday and 21.69% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests AUD/JPY prices may continue to rise.

Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger AUD/JPY-bullish contrarian trading bias.

GBP/JPY Daily Chart – Bearish RSI Divergence Hints at Uptrend Overextension

Japanese Yen Price Forecast: AUD/JPY, GBP/JPY, USD/JPY Key Levels

Chart prepared by Daniel Moss, created with Tradingview

GBP/JPY rates have surged higher in recent days, climbing over 2.3% after sliding to test the 34-EMA (149.23) for the first time this year. Although the formation of the moving averages and MACD signal bulls are in control of the exchange rate, bearish RSI divergence suggests that the recent surge higher could be running out of steam.

With that in mind, a counter-trend correction back towards psychological support at 150.00 could be in the offing if resistance at the yearly high (152.55) remains intact. A convincing break below the 50% Fibonacci (149.98) probably clearing a path for sellers to drive the exchange rate back towards the monthly low (148.53).

Alternatively, penetrating the yearly high (152.55) would probably intensify buying pressure and clear a path for prices to probe the April 2018 high (153.85).

Japanese Yen Price Forecast: AUD/JPY, GBP/JPY, USD/JPY Key Levels

The IG Client Sentiment Report shows 36.59% of traders are net-long with the ratio of traders short to long at 1.73 to 1. The number of traders net-long is 1.16% higher than yesterday and 11.02% higher from last week, while the number of traders net-short is 5.09% higher than yesterday and 0.87% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBP/JPY prices may continue to rise.

Positioning is more net-short than yesterday but less net-short from last week. The combination of current sentiment and recent changes gives us a further mixed GBP/JPY trading bias.

USD/JPY Daily Chart – 2020 Highs in Focus

Japanese Yen Price Forecast: AUD/JPY, GBP/JPY, USD/JPY Key Levels

Chart prepared by Daniel Moss, created with Tradingview

The USD/JPY exchange rate looks poised to continue storming to fresh yearly highs, as prices slice easily through the 110.00 mark and validating the topside break of the downtrend extending from the 2015 highs.

A challenge of the 61.8% Fibonacci expansion level (111.15) seems likely in the near term, with a break above paving the way for price to probe the March 2020 high (111.71). Hurdling that brings the February 2020 high (112.23) into play.

However, should price stumble at the 111.00 mark, a short-term pullback towards former resistance-turned-support at (109.85) could be in the offing.

Japanese Yen Price Forecast: AUD/JPY, GBP/JPY, USD/JPY Key Levels

The IG Client Sentiment Report shows 41.67% of traders are net-long with the ratio of traders short to long at 1.40 to 1. The number of traders net-long is 5.79% higher than yesterday and 14.08% higher from last week, while the number of traders net-short is 3.67% lower than yesterday and 4.22% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests USD/JPY prices may continue to rise.

Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current USD/JPY price trend may soon reverse lower despite the fact traders remain net-short.

— Written by Daniel Moss, Analyst for DailyFX

Follow me on Twitter @DanielGMoss

JPY Forecast

JPY Forecast

Recommended by Daniel Moss

Get Your Free JPY Forecast





Read more here