USDJPY Technical Update – Dollar Yen Retrace From 50% Level Gains Momentum
- The yen has strengthened as market participants seek a safe haven away from the USD, on elevated concerns that U.S. Congress may struggle to avert the “fiscal cliff” following the re-election of President Barack Obama. Last weeks COT report update showed that positioning for the week ending 30th October revealed a considerable net short yen scenario, the largest in almost six months with net non commercials at -37k.
- A squeeze on USDJPY longs is now taking place with those late to the party most vulnerable. Market participants are long USD/JPY with justification for the bullish bias possibly weakened after Romney was defeated in the election.
- The USDJPY continues to pull back from the recent range highs, which are aligned with the 50% retrace of the upside move from 84.17 > 77.12. A look back to April and May this year also reveals price had difficulty moving back above this 80.60 area after the dollar yen pair broke lower in April. The recent bounce from this resistance level adds additional technical significance.
- Today’s high came in at the 80.00 handle after this whole number gave support over previous trading sessions and resistance today. Price is now trading around the 79.36 level after failing to break back above this key psychological level.
- Our updated USD/JPY daily chart ( see figure 1 below) shows that price is now testing the recent swing low from 30/10/12 @ 79.27. This is also the 38.2% retrace of 77.12 > 80.67.
USDJPY Daily Chart (Figure 1)
- Moving down to the 4 hour timeframe chart (figure 2) shows this relatively prominent prior support level and associated 38.2% Fib. A failure to sustain this downside momentum may see a resumption of the rangebound trading and re-test of the 80.00 level in the first instance.
- On the flip side: a sustained break below 79.27, heading into the end of the week, could see a further squeeze on dollar/yen longs and would be a break of structure taking out this higher low.
USDJPY 4 Hour Chart (Figure 2)