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Japanese Yen Range Break Against US Dollar Could Echo for AUD. Where to for JPY?

Japanese Yen, USD/JPY, US Dollar, AUD/JPY, Australian Dollar – Talking Points

  • USD/JPY remains trapped in a range but threatens the downside
  • AUD/JPY has bounced off 87.30 but resistance lies ahead
  • Is the recent pause in Yen weakening temporary or permanent?

USD/JPY

USD/JPY is bumping along the bottom of the 127.00 – 131.25 range that it has been in for

over a month now.

This range trading environment comes after the price broke the lower bound of an ascending trend channel.

The stalling of the USD ascension is against the backdrop of the market winding back Fed rate hike expectations.

The 19th April was the day that JPY was at its historical lowest ebb against the CNY. When that CNY/JPY peak was made, China started to devalue CNY via USD/CNY and consequently, JPY stopped weakening more broadly.

A breakout of the current range may see acceleration of momentum in that direction. The price has moved below the short term 5-, 10-, and 21-day simple moving averages (SMA).

These SMAs have also rolled over from a positive gradient to a negative slope, potentially indicating momentum has turned from bullish to bearish in the near term.

Longer term SMAs remain below the price with positive gradients. The 55-day SMA currently coincides with historical break points in the 125.10 – 125.28 area, that could provide support.

On the topside, a break above the recent 20-year high of 131.25 may see a test a possible resistance zone at the January and February 2002 highs of 135.01 – 135.16.

USDJPY CHART

Chart created in TradingView

AUD/JPY

20th April saw AUD/JPY make a 7-year peak at 95.74 and then pullback to make a low at 87.30.

The 50% Fibonacci Retracement level of this overall move at 91.50. Just above that level is a previous high at 91.77 and this area could offer resistance.

Above there, previous highs and breakdown points may offer resistance in the 94.02 – 94.32 zone.

The 21- and 55-day simple moving averages (SMA) are just above the price and a break above them may provide momentum to test higher.

To the downside, support may lie the prior lows of 89.00 and 87.30.

AUDJPY

Chart created in TradingView

— Written by Daniel McCarthy, Strategist for DailyFX.com

To contact Daniel, use the comments section below or @DanMcCathyFX on Twitter