USD/JPY FX Price Action Analysis Update – WC 17th December
- Japanese yen sentiment overview – The general election in Japan this Sunday is widely expected to bring about a change in leadership and the favourites, the Liberal Democratic Party, have stated they intend on taking a much aggressive stance towards fighting deflation. This has seen a bearish run on the Japanese yen with many analysts calling for a secular trend going forward.
- Futures traders increased the open short JPY position by 4% on the weekly basis according to the latest COT report update from the CFTC. This gave a 94K reading versus the previous 90K level and a net $14.4 billion.
- Our previous USD/JPY update focused on the consolidation range trading box and noted that we would be monitoring price action around the pattern extremities, as order flow often builds around these areas which sometimes leads to increased volatility on a sustained breakout. This proved to be the case as the subsequent move above 82.83 (prior range resistance) met with renewed USD/JPY buying interest.
- Price moved within 22 pips of the previous 15/3/12 swing high before losing momentum late Friday, and edged down below the daily open, to print the first lower close in four days.
- We also note that the projected box consolidation range fell around 3 pips above Friday’s swing high. These box consolidation projection areas are an interesting area to watch as price can find support or resistance on occasion, especially when they are aligned with technical confluence areas.
- Nonetheless, the extended USD/JPY bullish move could yet see further upside and fading this kind of trend is not our favoured play. A move back to the 82.83 area box range highs, with a price action confirmation setup, would however be an interesting scenario if the market decides to “buy the rumour and sell the news”. The Tenkan Sen Ichimoku Kinko Hyo level (Ichimoku Cloud indicator) is also currently aligned with the 82.83 area.
- Any prolonged USD/JPY move higher brings the 161.8% Fibonacci expansion of 77.14 > 80.66 > 79.06 into focus, which has technical confluence with 22/11/2009 weekly swing low, around 84.70 – 84.80.
USD/JPY Daily Chart – Click to expand
Dollar/Yen – Forex Price Action Analysis Report – Week Of 17th December