Chart of the Day: USD/JPY
USD/JPY: The USD/JPY is caught in a symmetrical triangle on the hourly charts, and the break of this channel will likely determine the overriding direction seen in the pair for the remainder of the week. An upside break of the triangle will first suggest a retest of resistance at 95.80. This area is the 61.8% Fib retracement of the decline from 96.70, which has already seen a test and a failure. To the lower end, support is now seen at 94.30, which is an acceptable buy zne on the shorter term time frames.
EUR/JPY: The EUR/JPY is obeying clearly defined support and resistance, with the upper end of the trading range seen at 124.15 (the post gap failure area), while the lower end of the range is seen at 121.80. This lower area is a double bottom, so a downside break here would likely create substantial downside momentum. Shorter term, the next major area to watch is 123.15, which is a support turned resistance level. A break here will suggest an imminent retest of this week’s highs (124.15). A failure here will keep the focus on the downside and bring a negative close for the week.
AUD/JPY: The AUD/JPY is forming a reverse head and shoulders pattern on the shorter term time frames. We are also seeing a downtrend line from the major psychological 100 level, so we have balancing factors that will need to be overcome (in one direction or another) before the bias becomes clear. Prices are not far from testing the downtrend line, and if this area is overcome, this will provide confirmation for the reverse head and shoulders pattern, and imply a retest of the 100 level.
EUR/GBP: The EUR/GBP is attempting to post a recovery after reaching post-gap lows at 0.8505. We are seeing fairly consistent lower highs and lows, and a break of the psychological 0.85 area would be a highly bearish event (tripping momentum-fueled stop losses). Those looking to establish new short positions on rallies can look to 0.8550, and 0.8580 as suitable resistance levels. We would need to see prices trade back above 0.86 before we can start to consider bullish positions and a real reversal of the short term trend.