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Japanese yen breakout contained against US dollar

USD/JPY remains range bound after a move lower lacked follow through; EUR/JPY direction might have clues in narrowing daily ranges making a pennant and yen weakening has paused.

USD/JPY

Two days ago, USD/JPY nudged below a previous low that had held last week. The break was short lived and reversed yesterday.

It questioned the bearish potential of the move and maintains a range trading type environment. Prior to this set-up, USD/JPY had been in an ascending trend channel.

The 19th April was the day that JPY was at its historical lowest ebb against the CNY. When that CNY/JPY peak was made, China started to devalue CNY via USD/CNY and consequently, JPY stopped weakening more broadly.

Since then, short term momentum appears to have rolled over with the five-, ten-, and 21-day simple moving averages (SMA) below the price and turning from positive to negative gradients.
The five- and ten-day SMAs have crossed below the 21-day SMA, indicating a Death Cross.
On the other side of the equation, medium and long-term SMAs remain below the price and maintain positive gradients as shown by the 55- and 200-day SMAs.

This could suggest that short-term bearish momentum is conflicting with underlying medium and long-term bullish momentum.

On the topside, a break above the recent 20-year high of 131.25 may see a test a possible resistance zone at the January and February 2002 highs of 135.01 – 135.16.

Support might lie at the break points of 125.28 and 125.10.

EUR/JPY

EUR/JPY made a seven-year high last month and from that peak a descending trend line can be drawn crossing to consequent highs.

After making a low at 132.70 two weeks ago, the price has been making higher lows an ascending trend line can be drawn from that initial low.

These two trend lines have set up a potential bearish Pennant Formation. A break below the ascending trend line would confirm this.

Bearish momentum may further evolve as it would also be breaking below the ten-, 21 and 55-day simple moving averages (SMA).

Support could be at the prior low of 132.70 that also currently coincides with the 100-day SMA.

On the topside, resistance could be at the recent peaks of 138.32 and 140.00 or the June 2015 high of 141.06.


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The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.

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