USD/JPY 3-Months Long Consolidation Could be Ending

USD/JPY 3-Months Long Consolidation Could be Ending

Published: July 3rd, 2020

Daily chart

USD/JPY Daily Technical Analysis 3 July 2020

During the past 3 months, USD/JPY has been range trading between 109.40 resistance and 106.00 support zones. It makes it a 340 pip wide corridor, which is quite narrow considering it is a daily chart.

The price has been dancing around the 50 Simple Moving Average, but at the beginning of this week, there was a break and close above the SMA. At the same time price broke above the previous level of resistance, where SMA was rejected back on June 16. Then the price corrected down and found the support right at the SMA, with a very clean bounce off.

All these facts are hugely in favor of the uptrend, which could be either a short or long term. Fibonacci applied to the last wave down shows that the nearest resistance is located at 108.40, which is a 61.8% retracement level. Perhaps this will be the first upside target for the USD/JPY, but only if the SMA will not be penetrated to the downside. Because if there will be a daily break and close below the 107.29, which is yesterdays’ low, the bullish outlook will get invalidated and range trading may continue.

4-Hour chart

USD/JPY 4-Hour Technical Analysis 3 July 2020

On the 4-hour chart, the price started to print higher highs and higher lows suggesting the validity of an uptrend. The 50 Exponential Moving Average has been rejected for two consecutive times. The second time was just yesterday when price also rejected the 38.2% Fibonacci retracement applied to the ongoing upside correction. The Fibonacci support at 107.06 was rejected very cleanly at first, but then USD/JPY produced a spike lower but failed to close below.

It shows that bulls remain in control of the situation and as long as 4h and/or daily close will remain above the 107.33 recently printed low, USD/JPY will be going up. On this chart, the 108.40 upside resistance is also confirmed by 427.2% Fibs applied to the corrective wave down when EMA was rejected for the first time.

But as we have already mentioned when analyzing the Daily chart, break below the EMA will definitely show that bears won the battle for the trend, and USD/JPY is likely to re-test 106.00 support area.

1-Hour chart

USD/JPY 1-Hour Technical Analysis 3 July 2020

On the hourly chart price broke above the downtrend trendline as well as 200 EMA. Then USD/JPY has been trading within the ascending channel and yesterday reached the bottom of it. The lower channel trendline was rejected as there was no clean break and close below. At the same time, the 200 EMA was rejected cleanly and yet again we can see higher highs and higher lows starting to appear.

On this chart, we have applied another Fibonacci retracement indicator, this time to the current corrective wave down, where the channel along with the EMA was rejected. The 127.2% retracement level almost exactly corresponds to the previously discussed resistance level at 108.40. Finally, there was a clean bounce off the 107.35 support area, which previously was the resistance. It certainly looks like the uptrend might continue at any time.

30-Minute chart

USD/JPY 30-Minute Technical Analysis 3 July 2020

On the 30-minute chart there was a break below the uptrend trendline and after the breakout price cleanly rejected the trendline which was acting as the resistance. But after the bounce off the trendline, USD/JPY failed to produce a new lower low, which just adds more confidence that the uptrend remains valid.

The Fibonacci channel also shows a very bullish picture, because there was a perfect rejection of the 261.8% Fibonacci trendline. The RSI has produced a bullish divergence after which price went above the 200 EMA, clearly indicating the strong buying power. Right now, the USD/JPY price pulled back and is right at the EMA, which yet again acting as the support, and could provide a perfect short term buying opportunity.

Summary

While USD/JPY is consolidating on the long timeframe, on lower timeframes price consistently moving up and rejecting all possible support indicators. Bulls are in control at the moment and there might be another upside wave, potentially 80-100 pips.

Upside targets

As per the Daily, 4-hour, and 1-hour charts, the key resistance is seen at 108.40 level. This potential upside target is confirmed by 3 Fibonacci retracement levels as well as the average-price uptrend trendline as per the 4-hour chart.

Probability of a downtrend

There is a massive support area near 107.35 where multiple indicators were rejected. While the price might produce spikes below this area, only daily break and close below the 107.33 level will completely invalidate further growth potential and USD/JPY can either start to consolidate or move down towards the long term support at 106.00

Support: 107.36, 107.04

Resistance: 10816, 108.40

Show Results