USD/JPY hits important longer-term support
Last week we saw USD/JPY hit important support for six spectacular reasons:
- 15-year trendline at 106.15/10
- Three-year 61.8% Fibonacci support at 106.05/00
- 200-month moving average at 105.90/85
- Peak of the 2012/2013 rally at 105.44
- Seven-year trendline at 105.40
- 200-week moving average at 105.10
Here you can see most of the important levels shown clearly on the monthly chart, including the 200-month moving average (the red line).
As you can see in the weekly chart below, the low for the week was just above the seven-year trendline and 200-week moving average as we bottomed at 105.52.
Rarely do we see so many important longer-term support areas combine within the space of just 100 pips offering such a tremendous buying opportunity.
As if that was not enough the pair also managed to hit the measured targets for the head and shoulders pattern which formed from January 2015 to January 2016.
In the daily chart below the neckline of the head and shoulders pattern is shown as the red trendline joining the January 2015 low with the August 2015 low. Once this neckline was broken at 117.00 in January 2016 the pair headed for 115.50 and bottomed exactly here.
Perfect textbook technical analysis! It’s hardly surprising we have shot higher to regain over 300 pips over the past two weeks. This is likely to be only the beginning of a longer-term recovery.
A strong bounce has taken the pair back up through the April low, an encouraging sign for bulls as we head for the first Fibonacci resistance at 109.30/40. Although not overbought at this stage it would not surprise me to see the pair turn lower, as we are still in a negative trend and have yet to show a clear bottoming pattern.
Any sell-off again offers longer-term buying opportunities if you missed it the first time. We have some minor support at 107.50/00 but any further losses could target 106.50. Anywhere from here down to 105.00 is important support for all the reasons stated above. This pullback, if seen, could be the last chance to jump on board before the longer-term five-year bull trend resumes.
Technical Analyst & Trader
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