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Jason Sen

USD/JPY hovering around the big 100.00

The US dollar vs the Japanese Yen started a bull run at the end of 2011 and recovered four years of losses by mid-2015 when the forex pair managed to beat the 2007 high of 124.16. The 2015 high of 125.85 was set in April and since then the pair has been in a bear market.

As you can see in the monthly chart above, the pair has lost over 50% of the 2011-2015 recovery. It’s interesting to note how the 200-month moving average (the red line) worked well as support on the way down and then as resistance once it had been broken.

The weekly chart below shows potential for a double bottom pattern as we hover around the psychological round number of 100.00. However, with no confirmation from further short-term patterns or candle formations, it is too early to predict an end to the bear market. Don’t forget that the pair is in a multi-year bear trend – in fact my data only goes back as far as 1971 but, as you can see in the yearly chart below, the dollar has been weak for almost five decades.

The dollar has only managed to stablise over the past 20 years, with every recovery running into selling pressure at 135.00-145.00. As mentioned above there is no short-term buy signal despite oversold conditions at this stage. With red candles for the last five weeks, there is no sign of bulls taking control. Interesting again to note how the 200-week moving average (the red line) worked perfectly as resistance on the bounce from June lows to July highs this year.

So is there any hope for the bulls? The daily chart below shows the pair just holding above the lower trendline of a seven-month descending wedge. The stochastic is trying, without much success admittedly, to stage a recovery. The August low of 99.53 is less than 50 pips above the July low of 99.58 so one could argue there is a potential double bottom pattern – but it is a very weak argument.

If the pair can start to recovery, though, what can we then expect? A push higher through 101.00 could trigger a move towards August highs and the first Fibonacci resistance, both at 102.50/60. This should be a major challenge for bulls and a failure to beat this resistance will at best keep the pair trading sideways to ease oversold conditions.

However, a break above 102.50/60 then targets the upper trendline of the seven-month descending wedge at 103.70/103.90. Just above here USD/JPY meets strong Fibonacci resistance at 104.40/50 which is likely to be an excellent selling opportunity on the first test.

Jason Sen
Technical Analyst & Trader

For more information, trading education and offers visit InterTrader

The content of this article is the personal opinion of the author and not InterTrader. The information and comments provided herein under no circumstances are to be considered an offer or solicitation to invest. Nothing herein should be construed as investment advice. The information provided is believed to be accurate at the date the information is produced.

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