The Japanese Yen continued to trade lower in the week with the Yen Index going south by 1.53%, this thus brings the 2019 standing to -0.59%. The lowering of the Yen was majorly attributed to the strength in risk appetite as there were rumors that US is considering to roll back tariffs to facilitate trade negotiation with China but that was quickly denied.
Technically looking at the weekly chart below, Yen has being trading within a range 93.1 and 87.3, the recent upside rally could not push above 92.4/93.1 historical resistance zone and the 61.8% (92.7) Fibonacci retracement level of the uptrend 96.0 high – 87.0 low thereby resulted to another round of selloff. Key level support area is seen at 87.0 with minor support at 90.2 (100 week moving average). The currency still trades above the Simple Moving Average 100 week.
The formation of a bearish reversal pattern on the weekly timeframe, the Evening Star suggests a likely weakness to be seen in the coming days.
Looking at the Daily timeframe for Yen, we can observe a continuous daily lowering in the value of the currency presently below 61.8% Fibonacci at 91.3 now possibly heading to the next stop at 90.6. Moving Average Convergence and Divergence (MACD) line and histogram has crossed to the bearish territory.
A continuous weakness is likely to be seen towards first level support of 90.6/90.2 zone
On the other hand, a renewed rally above 93.10 would result to a bullish bias.
How to trade the possible Yen weakness
With the possible weakness in the Yen in mind, we would be looking at going long on Yen pairs with high probability trade setup to trigger our entry.
USDJPY – The first week in the year saw a brief spike down (02/01/2019) to test support level 104.65 but this downward momentum could not be sustained as the pair rallied back above 108.16 / 107.49 support levels. For two weeks, the bullish side has being gathering strength now trading slightly above 50% Fibonacci retracement level of 104.55 low and 114.62. The week saw a bullish reversal pattern formed (Morning Star Pattern).
We scale down to a lower timeframe the 4 hours chart for our setup. Price action is now trading above our Moving Average combo settings.
Price action crossover confirmed the new bullish move on 18th January, 2019 with the 100 day Moving Average now trading into the shorter term Moving averages (the last time we saw a crossover signal for a sell was on 17th December, 2018).
The pair is likely to rally towards 111.76 and 112.09 resistance area.
GBPJPY – The pair’s price action shows that it is trading above the Moving Average setup. The price action in the last 4hours corrected to test minor resistance now support at 141.10
A rally is likely to be seen 143.13 and 143.90 the previous support expected to be a resistance
NZDJPY – After a breakout in the downward sloping channel trendline to the upside in October 2018 at 75.20, the pair’s price action has since seen a trend reversal where its now finds support at the previous upper channel trendline at 73.04.
A renewed buying interest is expected in towards the next historical resistance level of 75.67 / 76.05.
On the other hand, a trade back into the channel trendline would see the pair fall towards the lower channel line.
Happy Trading Week