USDJPY Long Term View

We look today at the Monthly chart of the USDJPY. This pair is doing exactly what we expected when it reversed into the triangle (violet 5). The re-entry was followed by a break of a rising wedge which is a very powerful bearish pattern. In the same time the pair did cross its 20 monthly simple moving average and immediately re-tested it from below.

All that is a classic bearish scenario and we actually said that if and when the pair would re-entry the triangle boundary, the most logic outcome would be a move down to 100.

Now why the JPY has difficulties to move beyond the 110-109 area? You can see the reason here. This is where the currency meets the rising trend line (orange 1) that is coming from 1995 and touched point 4 of the triangle. Such a powerful trend line is always a good candidate for being a very firm support (arrow 1 blue).

The break down of such a support will give no doubt to traders that the way to 100 is open and a new bout of Carry-trade unwinding would result.

We do not have to tell you what the influences of such an event are and so, we are quite sure that there is some helping from central banks to mitigate the rapidity of the JPY appreciation. In view of the fact that the move in the price has now caused the RSI to move under its up trend line and also under 50, we think that the eventual medium term future of this pair will have 100 written all over it.

Look at the red dotted lines for the previous times when such events occurred in the RSI.

ForexManage

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