USD/JPY continued its journey north yesterday despite a weakening USD. Price managed to hold on to the gains post 99.50 but failed to continue its previous gear of bullish momentum as represented by the rising Channel. Nonetheless, the holding of 99.50 is encouraging for bulls who wish to see price touching 100.0 once more after breaking below it more than 1 month ago. Today’s market sentiment is also bullish, with Nikkei 225 closing 1.78% higher than before, and US futures trading higher. This resulted in USD pushing lower than yesterday, with the DXY Dollar Index trading below 83.0 when the USD/JPY chart is captured, compared to the yesterday US close of 83.054. However, the declining USD failed to jeopardize USD/JPY bulls, with price actually trading higher during early European hours, getting as high as 99.9, just 10 pips to reach 100.0. This underlines the immense strength of JPY bears currently, brought about by renewed confidence in BOJ and Abenomics, a reasonable assertion considering that Japanese numbers are looking much healthier than before. The fact that market is betting that Ben Bernanke would not have the gall to carry out the QE Tapering as mentioned previously is also helping BOJ’s idleness – market simply does not believe that BOJ will be sitting on their hands for too long and expect some sort of a reply in the future. Many may argue that market may be setting themselves up for a fall in the future, but that would be irrelevant to current speculators, who are enjoying the rally currently.
From a technical perspective, a move to 100.0 is certainly possible. Stochastic readings are just entering the Overbought region, and does not mean that current bullish momentum is over. Furthermore, the Channel Bottom is currently above the 100.0 mark, which means that a retest of Channel Bottom would mean that 100.0 is breached. Nonetheless, it is important to note that 100.0 is a strong resistance line and price has failed many times back in April and early May before succeeding. Furthermore, all failed attempts did not manage to overshoot 100.0, but instead falter around 10 pips below the 100.0, where today’s swing high was at today. Furthermore, Stochastic reading is currently experiencing an acute turn pointing lower, which does not bode well for further bullish momentum. Hence the bottomline is this – yes 100.0 is achievable from a technical perspective, but do not expect it to be a walk in the park especially given technical concerns coupled with USD counter-trend.
Weekly Chart shows similar interpretation and issues for bulls. Current candle is setting itself up nicely for a 3 White Soldier bullish reversal from 94.0. Even if the sell-off from May highs is still in play, price could theoretically move higher to test the underside of the rising Channel without invalidating current bearish move. The same could be said about Stochastic, which is indicating either an interim bullish cycle which could still turn around a few candles later (e.g. another stoch peak under 80.0, potentially lining up with a bearish rejection from the rising Channel), or a proper bullish cycle which could send Stoch readings up into the Overbought region, translating into a bullish break into the Channel once again, opening up 104.0 and perhaps a fresh 2013 high.