USD/JPY Potential Bullish Butterfly Pattern

The US dollar is the worst performing currency today, as Fed rate cut bets show markets are convinced they will see 50 basis points in rate cuts this year with possibly 75 bps worth over the next 12 months.

Despite broad dollar weakness, USDJPY appears to be holding key support as risk appetite remains supported on beliefs that low-inflation and low-growth will lead to stable central bank support, thus providing optimism the US expansion will continue.

Currently price has tentatively found key support from 108.00, which is where we could be seeing the formation of a bullish butterfly pattern.  This was covered in this week’s MarketPulse webinar (fast forward to the 59 minute 45 second mark).  Point D is confirmed with the 161.8% Fibonacci expansion level of the X to A leg and the 161.8% Fibonacci expansion level of the B to C move.

If we do see a major bullish breakout, major resistance is gathering around the 110.50 level, which is where currently near both the 50- and 100-day Simple Moving Averages (SMAs).  If the bullish pattern is invalidated, bearish momentum could target the 106.68 level initially, which is the 78.6% Fibonacci retracement of the 2018 low to high move.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Ed Moya

Ed Moya

Senior Market Analyst, The Americas at OANDA
With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
Ed Moya