Talking Points:
- USD/JPY is in a strange place. It is below an impressive uptrend but could yet hold on
- Much may depend on this week’s close
- Meanwhile, AUD/JPY looks more precarious. Bulls must defend mid-April’s low
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The Japanese Yen is in an odd spot against the US Dollar technically speaking.
A quite-impressive uptrend from April 19 was broken on May 12 -an uptrend which included a run of eight straight higher closes. And if bulls have the resolve to get that rise back on track they’ve kept it well hidden so far.
However, the bears aren’t showing much belief either. That uptrend break was nailed down by just two strong, consecutive daily falls, on May 16 and 17. Since then the pair has done nothing much of anything, having spent the last week in a very tight range indeed.
So, what does come next? Well, current price action takes the Dollar close to the top of an emerging downtrend which started on May 11. Admittedly this isn’t very old, but the bulls are going to have to at least reach it if they’re going to consolidate around current levels and then maybe push higher.
At present, it comes in at 112.31 and it looks as though a Friday (and of course weekly) close above that will be a tall order for the US Dollar.
If it indeed proves to be too much then bear in mind that there’s little solid support between current levels and mid-April’s lows around 108.42.
AUD/JPY looks precarious too.It has moved even further away from the trendline resistance level which has capped it all year. In truth, it’s now so far away that a serious assault looks most unlikely without a lengthy period of consolidation and then a push higher.
While the cross may yet consolidate around current levels, support at the April 19 closing low – which stemmed the last serious foray lower – is coming into view. The bulls will need to defend this point vigorously.
— Written by David Cottle, DailyFX Research
Contact and follow David on Twitter:@DavidCottleFX