An eventful week in Japanese markets should get more interesting in the coming weeks. USDJPY strength is suspect as long as the Nikkei 225 is capped by its May-July trendline. USDZAR completed a near term topping pattern on Friday and objectives are defined.
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USD/JPY and Nikkei 225
Daily
Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0
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– USDJPY trade since 5/22 may take the form of a triangle, a common continuation pattern. The Nikkei may also be forming a triangle. The USDJPY triangle break was NOT confirmed by the Nikkei break.
– The apex of the triangle (black lines drawn off of highs/lows and red lines drawn off of closes) occurs 9/26, 91 trading days from the 5/22 top. Today was the 72nd day of consolidation, which is more than 75% of the distance from the top to the apex. The risk of a false breakout increases after the 75% point however (Edwards and Magee, Technical Analysis of Stock Trends).
– At turns, the Nikkei 225 (NK) and USDJPY have diverged (failed to confirm price extremes). Both topped on 5/22. At the June low, the USDJPY low wasn’t confirmed by a new NK low. At the July high, the NK high wasn’t confirmed by a new USDJPY high. At the August low, the NK low wasn’t confirmed by a new USDJPY low.
-Friday’s USDJPY slide found low at the topside of former trendline resistance. Daily structure is considered healthy as long as daily close is above 98.80 (prior closing peak).
Strategy – Recovery off of post NFP low in USDJPY is promising. Looking for support on Monday…watch 98.90. Below 98.20 would negate bullish swing potential and shift focus towards 96.70/90.
Daily
Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0
– EURJPY trade since 5/22 may also take the form of a triangle, a common continuation pattern. The risk of a false breakout due to the proximity of the apex applies to EURJPY in the same manner as USDJPY.
-Triangle support crosses 129.30 next week. The close of the August low day (8/12) is 128.87 is also possible support.
Strategy – Monitor for a breakout / monitor for support from 128.90-129.30. Beware a false break, especially if lower. 127.50 (close of the large range day on 6/13) is possible support below the August low of 127.96.
Weekly
Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0
-ZARJPY has made important lows at this time of year in recent years. The 2011 low occurred in September. The 2012 low occurred in October. In other words, frequency of lows is roughly 1 year.
-Price is testing the line that extends off of the May and July highs as well as the series of highs from 8/9-8/15.
-Weekly RSI(13) has crossed above 40. A bullish momentum profile is one in which RSI exceeds 70 at price highs and holds above 30 at price lows.
-‘Launch points’ for extended rallies have occurred as double bottoms of sorts in recent years. In 2011, lows were made in September and November. In 2012, lows were made in June and October. This year, lows have been made in June and August (remains to be seen if the August low holds…but off to a good start).
-Getting ahead of ourselves here…but price could be forming a massive inverse head and shoulders pattern (upward sloping as well).
Strategy – Need to see how market handles current resistance before doing anything but you’ll want to keep this one on the watch list.
Weekly
Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0
– USDZAR traded to its highest level since March 2009 last week before closing near the low for the week.
-Currently testing steep trendline support (in red), a break shifts focus to the former resistance line turned support (in blue).
– Friday’s breakdown completed a head and shoulders top (with a weak right shoulder). Objectives are 9.83 and 9.80 (see below chart).
-Resistance is 10.07-10.10.
Strategy – Looking for a sale in 10.07-10.10 region next week. I would also look to nibble on the long side into 9.75-9.83.
USD/ZAR
4Hour
Chart Prepared by Jamie Saettele, CMT using Marketscope 2.0
— Written by Jamie Saettele, CMT, Senior Technical Strategist for DailyFX.com
To contact Jamie e-mail jsaettele@dailyfx.com. Follow him on Twitter @JamieSaettele