USDJPY – Yen Surge Showing No Sign of Abating

The yen has been flying again on Thursday, after the prospect of intervention in the currency markets to stem its appreciation was played down by a number of officials including Prime Minister Shinzo Abe.

The comments in recent days has sent USDJPY into something of a freefall, first smashing through 1.11 – a key level of support over the last couple of months – to trade at its lowest level since the Bank of Japan expanded its quantitative and qualitative easing (QQE) program in October 2014.

USDJPY Daily

The decline is currently showing no signs of abating with the MACD and stochastic showing downside momentum building – confirming the move – and the pair trading near its daily lows, now down 1.7% on the day.

Potentially more bearish is the weekly chart, with the candle also currently (only completed candle matters!) a marabozu. Moreover, the lagging line on the Ichimoku chart has this week broken below cloud (Senkou) span B which confirms the move into bearish territory on the weekly chart.

USDJPY Weekly

The next obvious potential support zone for the pair comes around 105-105.50, with this having been an important support and resistance region on the way up.

That said, prior to this, it could run into support around 106.50 – the 38.2% Fibonacci retracement of the move from October 2011 lows to last June’s highs.

What’s more, this roughly coincides with the more aggressive projection (red line) from the break of the head and shoulders which formed between November 2014 and February this year (the move from the head to the neckline, projected below it).

Below here, 103.75-104.10 could be key, having been a notable resistance zone throughout the first two thirds of 2014, followed by 100.50-101.00 – major support throughout 2014 and the 50% retracement of the above Fib move.

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Craig Erlam
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the BBC and The Telegraph, and he also appears regularly as a guest commentator on Bloomberg TV, CNBC, FOX Business and BNN. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.