USD/JPY—Consolidation or Topping?

04/13/2015 9:00 am EST

Focus: FOREX

Kristian Kerr

Chief Technical Strategist, Forex Capital Markets LLC


Kristian Kerr, of DailyFX.com, offers two distinct ways of looking at the price action of this currency pair over the past few weeks—as a modest correction to a primary trend or a topping pattern setting the stage for a deeper correction—along with the key level and event risks to watch this week.


Talking Points

  • USD/JPY at a crossroads
  • Reaction around 121.00 should prove important

There are a couple of ways to looks at the price action in USD/JPY over the past few weeks. The first is just as a modest correction to the primary trend. Supporting this view is the fact that the exchange rate did make a new multi-year high last month and no real big levels of support have been breached since the corrective process started. In this view, USD/JPY is just biding time before the next push higher. The alternative view is that USD/JPY effectively failed in March where it did in December leaving a potential double top on the charts. The other potential negative here is that the action since mid-February can be interpreted as a potential head & shoulders top. A failure somewhere between 120.50 and 121.00 would finish the right shoulder and set the stage for a much deeper correction against the trend. A foothold over 121.00 would suggest the USD uptrend is resuming.

USD/JPY Daily Chart: April 10, 2015

chart
Charts Created using Marketscope—Prepared by Kristian Kerr
Click to Enlarge

Key Event Risk in the Week Ahead:

chart
Click to Enlarge

Levels to Watch

Resistance: 120.60 (Gann), 120.90 (Gann)

Support: 120.20 (Fibonacci), 119.80 (Gann)

Strategy: Sell USD/JPY

Entry: Sell USD/JPY at 120.60

Stop: Daily close above 120.90

Target: Open

By Kristian Kerr, Senior Currency Strategist, DailyFX.com

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