USD/JPY: Pause Or Paws?

Talking Points

  • EUR/USD cracks key Fibo
  • AUD/USD fails at retracement level
  • USD/JPY too far too fast?

Foreign Exchange Price & Time at a Glance:

EUR/USD

Charts Created using Marketscope – Prepared by Kristian Kerr.

  • EUR/USD broke above the 78.6% retracement of the May range this morning
  • Our near-term trend bias is now higher in the euro
  • Minor Gann resistance is eyed around 1.1390 ahead of the year’s high at 1.1465
  • A very minor cycle turn window is eyed here
  • A close under 1.1070 would turn us negative again on the euro

EUR/USD Strategy: Square

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

EUR/USD

*1.1070

1.1230

1.1350

1.1390

*1.1465

AUD/USD

Charts Created using Marketscope – Prepared by Kristian Kerr.

  • AUD/USD failed yesterday at the 38% retracement of the May –June decline
  • Our near-term trend bias is lower in the rate while below .7950
  • A move under the 78.6% retracement of the April – May advance near .7665 is needed to re-instill downside momentum in the rate
  • A very minor turn window is eyed early next week
  • A daily close above .7950 would turn us positive on the Aussie

AUD/USD Strategy: Like the short side while below .7950.

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

AUD/USD

.7665

.7710

.7740

.7820

.7885

Focus Chart of the Day: USD/JPY

USD/JPY

USD/JPY dealt at its highest level in over 12-years earlier this week before reversing fairly sharply from just above 125.00 to leave an “outside day” on the daily chart. Not surprisingly this reversal coincided with an extreme reading in the Daily Sentiment Index or DSI which fell to just 5% yen bulls the day prior. Has the pair gone too far too fast? Or is this just a natural pause ahead of key data after taking out some very important resistance levels (2007 high, 78.6% retracement of 2002-2011 decline) over the past few weeks? Given the almost 6-month range that preceded this latest burst higher it is difficult to see this move petering out so quickly, but stranger things have happened. The highs from November/December 2002 around 125.50 look to be the next big upside pivot with a move above there needed to set up a push towards a Fibonacci attraction near 128.00. Weakness under 123.35 would warn a deeper correction is starting to take shape.

— Written by Kristian Kerr, Senior Currency Strategist for DailyFX.com.

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