USDJPY Bearish Engulfing At Key Psychological Level
- The USD/JPY has printed a bearish engulfing candle at the 80.00 handle – a key psychological level for the dollar/yen currency pair.
- The bearish engulfing line is a technical chart pattern which consists of a white/upside candle, which is then followed by a black candlestick that has completely eclipsed the prior move. This forms after price moves above the prior days high (potentially trapping longs), and closes underneath – thus engulfing the previous days price action.
- Yen-cross selling was likewise the order of the day on Friday as the market retraced gains printed earlier in the week.
- This comes as large speculators have moved to an aggregate net short yen position of 18K in comparison with the net long 10K figure printed last week. The shift in sentiment from net long yen to net short is worthy of note; nonetheless, the bearish engulfing candle is not a lagging indicator to the same extent as the COT report which is derived from futures market positioning last Tuesday.
- Potential near term technical areas of note, on a confirmation move below the engulfing candle, are the highlighted previous swing highs at 79.20 and 78.85. Further to this, the 78.00 area has proved to be major support for the US dollar to Japanese Yen rate and any sustained move lower would need to deal with this potential “trouble area”.
- The 80.00 level is the initial potential resistance level we will be monitoring on an upside move. The bearish engulfing high is located around 80.40; any failure by the USDJPY bears to hold price under this candle high brings the 50% retrace of the last major swing lower into focus which has price structure confluence.
- See the USDJPY analysis youtube video below.