Bottom line: USDJPY medium structure now turns bullish against 101.18 lows in March 2020. The currency might have bounced off the support zone around 104.00/105.00 recently, as bulls prepare to take control back.

Fundamental Outlook:

NZDUSD had peaked at 0.6715 mark on July 31, 2020 before reversing. The exchange rate is currently seen around 0.6650 mark and is expected to drop further as NZDUSD faces renewed selling pressure over rising US-China rift. Risk appetite might swiftly reverse, dragging NZDUSD down as well.

SPX500 continued its rally and managed to close higher by +0.64%, around 3327. Dow Jones had also rallied over +1.39% closing around 27200 mark. The optimism over stimulus hopes has added to the above rally but this might reverse as US-China tensions continue to escalate further. In the latest, the US Secretary has urged Google and Apple to remove Chinese Apps from their app stores.

USDJPY had managed to rally through 106.50 levels over the last week. The exchange rate is trading lower towards 105.40 mark as we prepare to publish today’s update and set to rise further as US Dollar might gain over the next several weeks. The decision on extending USD 600 per week unemployment benefit is still pending.

Technical Analysis:

USDJPY medium term structure might be turning bullish as discussed over the last week. The currency has confirmed a potential bullish reversal from 104.20 levels as it carves a huge engulfing bullish candlestick pattern on the daily chart. Looking higher for now.

USDJPY drop from 111.75 has been corrective until now and a break above initial resistance at 107.50 will certainly confirm that the trend has reversed. Only a sustained break below 104.20 and 103.50 would indicate that bears are here to stay and push below 101.18 levels.

Also note that prices have bounced from just below the fibonacci 0.618 retracement (105.20) of earlier rally between 101.18 and 111.75 respectively. Probability remains for a continued push towards 107.50 and 110.00 levels, going forward.

Most traders might be looking to add fresh long positions around current price (105.40), with protective stops below 101.18 and projected target towards 107.50 and further. Only a break below 104.20 might change the bullish structure.

Prepared by

Harsh Japee, Technical Analyst.

USDJPY Chart

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