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Market Analysis

Technical analysis of USDJPY

July 29, 2019
BY Michael Stark

Dollar-yen (USDJPY) has been pretty placid this morning GMT, although this symbol has held around the levels reached last Thursday. The most important area on the four-hour chart is a resistance around 109. This area was tested at the start of June, after which price moved dramatically downward. Low support is probably the area of 106.70, 2019’s low, from which price bounced towards the end of June.

Technical indicators on USDJPY H4

The usual combination of moving averages suggests a buy signal. Price remains above all of the 20 (from Bands), 50, 100 and 200-period simple moving averages. The 50 SMA golden crossed the 200 late on Friday night, and the 20-period line also golden crossed the other three around the middle of last week. In the next few days, then, we might look for support around 108.20, the area of the 100-period SMA.

Bollinger Bands (20, 0, 2) have expanded significantly since the second half of last week. This indicates that volatility has increased since then. Meanwhile the slow stochastic (15, 5, 5) has moved out of the overbought zone, although the signal line is just above 80. Last week’s downward crossover in overbought has not yet been followed by significant losses. MACD (12, 30, 9) is somewhat unclear. The histogram moved slightly below the signal line this morning, but both are clearly within positive territory.

Price action and Fibonacci

Price action on USDJPY H4 seems to indicate consolidation. The sequence of dojis and near-dojis at the end of last week suggests that upward potential is limited in the immediate future. However, the long tail of today’s second candle is a factor against a significant retracement from recent highs. The bottom of this tail touching the central line of Bands might adumbrate the latter’s importance as a short-term support.

Highs and lows in the first three weeks of July form the basis for the Fibonacci retracement lines here. 61.8% might be important given the effort required for a break last week. Below this, 50% occurs in the same area as the 50 and 200 SMAs, so this is probably a zone to monitor. To the upside, the next significant area from Fibo is 100%, full retracement to the area of 109.

Key data points

Although not strictly a data point, the Fed’s meeting on Wednesday night GMT is of critical importance for dollar-yen in addition to every other pair with the dollar. A cut of 0.25% to the funds rate appears to be fully priced in. The unlikely prospects of a cut of half a percent or no cut would most likely change the technical picture for USDJPY completely.

Technical analysis USDJPY: summary

On the whole, technical indicators on H4 USDJPY suggest a period of consolidation. There is the possibility that price might continue to move upward, but big gains seem to be unlikely in the runup to Wednesday’s news. Domination of fundamental events this week almost to the exclusion of technicals appears to be favorable.

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