Signs of USD Weakness, JPY Strength Resuming?
After a choppy start to the week for USDJPY and JPY Crosses, such as EURJPY, with traders bombarded with headlines related to trade tariffs and retaliatory measures, the back end of the week has seen some USDJPY downside emerge as general long dollar positions are scaled back, and economic data from Japan has provided support for the view that the country’s central bank may be able to keep raising interest rates.
Much stronger than expected wage growth and household spending updates from Japan this week, alongside comments from the Bank of Japan’s (BoJ) most hawkish committee member which started interest rates should rise from the current 0.5% level up to at least 1% in the next year have combined to boost the JPY side of the USDJPY pair.
While this has helped USDJPY touch a low at 150.95 early this morning, and EURJPY a low at 156.75 we must not forget its US Non-farm Payrolls Day, the outcome of which could generate large price swings up or down when it’s released at 1330 GMT.
Adding to the potential for further volatility will be any headlines from the first meeting between President Trump and Japanese Prime Minister Ishiba later today, with traders likely to be on high alert for headlines regarding tariffs, Japan’s trade surplus and the current weakness of the JPY.
With these key risk events ahead of us, being aware of the technical trends and potential interesting chart levels for USDJPY and EURJPY may be useful.
USDJPY – Back Towards First Retracement Support
Since posting a high at 158.88 on January 10th, USDJPY has seen selling pressure in a move that’s extended weakness to the downside.
This fall is now testing potential support at 151.50, which is the 38.2% retracement of September 16th 2024 to 158.88 January 10th 2025 high. The 38.2% retracement often represents a level that can either act as support and see resumption of price strength or give way on a closing basis, suggesting risks of a deeper decline.
Therefore, how this 151.50 level is defended on a closing basis should be monitored.
While closes below a 38.2% retracement support may in the past have seen a more extended phase of price weakness, it doesn’t mean it will do so again. However if a break was to materialise it may suggest further declines are possible towards the next support at 149.22, which is the deeper 50% retracement level, or maybe even on to 148.64, which is the December 3rd price low.
Potential Resistance:
Of course, if the 151.50 support holds, it’s equally possible USDJPY strength can develop again, but what are the possible resistance levels that may need to be broken to see potential of a move higher in price?
Thursday’s high stands at 152.90, and it may be breaks above this resistance, that could see further upside strength towards 153.79, which represents half of the latest weakness, possibly even further.
EURJPY – Back to Lower Limits of the Range
Since the 154.41 August 5th 2024 low in EURJPY, buyers and sellers appear to have been in balance, reflected by the formation of a sideways range in price.
This range has held price activity within converging trendlines connecting recent highs and low and reflects sellers being found at a lower level each time strength is seen and buyers materialising at a higher level as price weakness develops, forming a triangular pattern, as shown on the chart above.
Possible Support Levels:
With the latest EURJPY weakness seeing moves back to the lower limits of the sideways pattern, the support currently stands at 157.10. Closing breaks below this level could suggest buyers who have previously been happy to pay higher prices and offer support to price declines, are no longer active.
As such, closing breaks under 157.10 may suggest a more extended phase of price weakness, which could result in declines to test support at 154.41 which is the August 2024 low, even possibly further towards the next potential support at 153.10.
Resistance Levels:
Of course, a downside break hasn’t materialised yet, and it’s possible 157.10 support could hold the current weakness, possibly marking a level where buyers have been found again.
If this is the case, tests of the upper range extreme, which currently stands at 163.50, may develop, although a closing break above this resistance level is required to suggest the potential of a more extended rally.
The material provided here has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Whilst it is not subject to any prohibition on dealing ahead of the dissemination of investment research, we will not seek to take any advantage before providing it to our clients.
Pepperstone doesn’t represent that the material provided here is accurate, current or complete, and therefore shouldn’t be relied upon as such. The information, whether from a third party or not, isn’t to be considered as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product or instrument; or to participate in any particular trading strategy. It does not take into account readers’ financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of Pepperstone, reproduction or redistribution of this information isn’t permitted.
Much stronger than expected wage growth and household spending updates from Japan this week, alongside comments from the Bank of Japan’s (BoJ) most hawkish committee member which started interest rates should rise from the current 0.5% level up to at least 1% in the next year have combined to boost the JPY side of the USDJPY pair.
While this has helped USDJPY touch a low at 150.95 early this morning, and EURJPY a low at 156.75 we must not forget its US Non-farm Payrolls Day, the outcome of which could generate large price swings up or down when it’s released at 1330 GMT.
Adding to the potential for further volatility will be any headlines from the first meeting between President Trump and Japanese Prime Minister Ishiba later today, with traders likely to be on high alert for headlines regarding tariffs, Japan’s trade surplus and the current weakness of the JPY.
With these key risk events ahead of us, being aware of the technical trends and potential interesting chart levels for USDJPY and EURJPY may be useful.
USDJPY – Back Towards First Retracement Support
Since posting a high at 158.88 on January 10th, USDJPY has seen selling pressure in a move that’s extended weakness to the downside.
This fall is now testing potential support at 151.50, which is the 38.2% retracement of September 16th 2024 to 158.88 January 10th 2025 high. The 38.2% retracement often represents a level that can either act as support and see resumption of price strength or give way on a closing basis, suggesting risks of a deeper decline.
Therefore, how this 151.50 level is defended on a closing basis should be monitored.
While closes below a 38.2% retracement support may in the past have seen a more extended phase of price weakness, it doesn’t mean it will do so again. However if a break was to materialise it may suggest further declines are possible towards the next support at 149.22, which is the deeper 50% retracement level, or maybe even on to 148.64, which is the December 3rd price low.
Potential Resistance:
Of course, if the 151.50 support holds, it’s equally possible USDJPY strength can develop again, but what are the possible resistance levels that may need to be broken to see potential of a move higher in price?
Thursday’s high stands at 152.90, and it may be breaks above this resistance, that could see further upside strength towards 153.79, which represents half of the latest weakness, possibly even further.
EURJPY – Back to Lower Limits of the Range
Since the 154.41 August 5th 2024 low in EURJPY, buyers and sellers appear to have been in balance, reflected by the formation of a sideways range in price.
This range has held price activity within converging trendlines connecting recent highs and low and reflects sellers being found at a lower level each time strength is seen and buyers materialising at a higher level as price weakness develops, forming a triangular pattern, as shown on the chart above.
Possible Support Levels:
With the latest EURJPY weakness seeing moves back to the lower limits of the sideways pattern, the support currently stands at 157.10. Closing breaks below this level could suggest buyers who have previously been happy to pay higher prices and offer support to price declines, are no longer active.
As such, closing breaks under 157.10 may suggest a more extended phase of price weakness, which could result in declines to test support at 154.41 which is the August 2024 low, even possibly further towards the next potential support at 153.10.
Resistance Levels:
Of course, a downside break hasn’t materialised yet, and it’s possible 157.10 support could hold the current weakness, possibly marking a level where buyers have been found again.
If this is the case, tests of the upper range extreme, which currently stands at 163.50, may develop, although a closing break above this resistance level is required to suggest the potential of a more extended rally.
The material provided here has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Whilst it is not subject to any prohibition on dealing ahead of the dissemination of investment research, we will not seek to take any advantage before providing it to our clients.
Pepperstone doesn’t represent that the material provided here is accurate, current or complete, and therefore shouldn’t be relied upon as such. The information, whether from a third party or not, isn’t to be considered as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product or instrument; or to participate in any particular trading strategy. It does not take into account readers’ financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of Pepperstone, reproduction or redistribution of this information isn’t permitted.
Global risk Warning CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail investor accounts lose money when trading in CFDs. You should consider whether you understand how CFD
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Global risk Warning CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail investor accounts lose money when trading in CFDs. You should consider whether you understand how CFD
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.