Bottom line: USDJPY medium to long term structure is bullish against 104.00 levels. The currency is trading around 106.00 as we prepare to publish and might be looking to resume towards 110.00 and higher in the next few weeks.

 Fundamental Outlook:

NZDUSD had rallied over +1.0% and closed comfortable above the 0.6600 handle yesterday. The recent strength might be fueled by risk sentiment as Dow Jones, SPX500, NASDAQ and DAX managed to close higher again. It remains to be seen how markets react to the Jackson Hole Symposium starting today. The US Dollar Index might be setting up to gain over the next several weeks.

SPX500 futures climbed to fresh highs at 3486, closing above +1.0% yesterday. It might be anybody’s guess over a potential bearish reversal but the indices faces a major event risk. Investors could be closely following the Jackson Hole Symposium starting today. Any tone of pessimism by Fed Chair Jerome Powell might trigger a reversal across global indices.

USDJPY had print highs around 106.50 yesterday before pulling back and managed to close just below 106.00. The exchange rate might remain volatile amid news of resignation from Prime Minister Abe due to health concerns. The Jackson Hole event might further add to the volatility.

Technical Analysis:

USDJPY bulls seem to be in control for now as it trades close to 106.00 handle. The currency might be targeting 110.00 and above 111.75 until prices hold above 104.20 lows. Bulls are looking poised to remain in control from here. Watch out for a break above 107.50 to confirm and accelerate.

USDJPY had rallied from 101.18 through 111.75 between March 09 and 24, 2020. The currency had dropped to fibonacci 0.618 retracement of the above rally thereafter. The most probable trade direction from here could be higher towards 111.75 at least.

Most traders might be inclined to hold on to long positions initiated earlier with a protective stop below 104.00 and target potential towards 107.50, 108.20 and 110.00 respectively in the next few weeks. USDJPY should ideally hold above 101.18 support, going forward.

Prepared by

Harsh Japee, Technical Analyst.

USDJPY Chart

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