USD/JPY Analysis:
- USD/JPY continues to waver around 105.000
- Expected upcoming volatility may support safe-haven Yen
- IG Client Sentiment (IGCS) supportive of bearish bias
With uncertainty around US elections and contentious stimulus package negotiations, the Japanese Yen (JPY) has strengthened against the US Dollar of recent. The new Japanese Prime Minister Yoshihide Suga seems to have settled into the role with the newly elected PM making plans to prove Japan’s solidarity with the US.
TECHNICAL ANALYSIS
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USD/JPY Weekly Chart:
Chart prepared by Warren Venketas, IG
USD/JPY continues to trade within the multi-year descending triangle. Price action is fluctuating around horizontal support. The key 105.00 psychological level will likely be tested as US elections approach. The expected increased volatility leading up to the election may see the descending triangle formation fill out as market participants flock to the safe haven.
USD/JPY Daily Chart:
Chart prepared by Warren Venketas, IG
The daily chart shows the 105.00 support level being tested in July and September, with the September 104.00 low viewed as the next level of support should price fall below 105.00. Long-term JPY bulls could see the 50% 100.91 Fibonacci level as a consequent support target going forward.
Although less likely, short-term upside could see price push up towards the 61.8% 106.81 resistance level should expected upcoming volatility and global risk aversion subside.
UPCOMING US ECONOMIC DATA
This Friday Retail Sales (12:30GMT) and Consumer Sentiment (14:00GMT) data are scheduled without much change expected from previous figures. Any significant deviation from estimates could cause large price swings in USD/JPY.
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USD/JPY: STRATEGY MOVING FORWARD
Key points to consider:
- USD/JPY: 105.00 psychological level
- US economic data
- Japan and UK trade deal negotiations
IG CLIENT SENTIMENT DATA POINTS TO EXTENDED DOWNWARD MOMENTUM
| Change in | Longs | Shorts | OI |
| Daily | -14% | 7% | -6% |
| Weekly | 4% | -4% | 0% |
IGCS shows retail traders are currently net long on USD/JPY, with 59% of traders currently holding long positions (as of this writing). At DailyFX we typically take a contrarian view to crowd sentiment, and the fact traders are net-long is suggestive of a bearish bias on the pair.
— Written by Warren Venketas for DailyFX.com
Contact and follow Warren on Twitter: @WVenketas