USD/JPY: a broader technical look.

The USD/JPY is trading up near a key level at 124 and this is a major support / resistance region that has been influential for at least the last 30 years. That is, as far as I can see on my monthly chart (below). My analysis of the USD/JPY is purely technical in nature and reveals that 124 may prove to be a key demarcation level for one of two potential bullish technical patterns.

U/J monthly: 1983 – present: You can see from this chart how 124 has been a major reaction point since at least the 80s. I’m noting a potential ‘Cup’ pattern forming and wondering if we may end up experiencing a period of protracted choppiness to enable the formation of a ‘Handle’ that so often plays out with these patterns? The height of the Cup is around 4,900 pips or so and any close, hold and continuation above 124 may see the U/J extend higher by this order of magnitude. If so, this would still only bring price back up to near the 50% fib of the major swing low move (1983 – 2012):

UJmonthly

U/J monthly MT4 chart: this is how the monthly chart appears on my MT4 platform. There is less data here but the ‘Cup’ is quite obvious:

UJmonthly

The point to consider now is that there could be a period of choppiness / consolidation, call it what you like, whilst a ‘Handle’ builds to tack on to this ‘Cup’ as illustrated below:

UJmonthly

Now, another pattern is jumping out from this chart and that is a bullish ‘Inverse Head & Shoulder’ pattern with a neck line at the key 124 level. Thus, whether a ‘Cup ‘n’ Handle’ or ‘Inverse H&S’, this 124 level is where it’s all at!UJmonthly

Any failure for the U/J to hold above 124 over the coming weeks may suggest a pullback and, in turn, may lead to the consolidation to fulfill either a ‘Handle’ or an ‘Inverse H&S’. Fibonacci levels placed on the last major swing high move (2011-2015) show that a 50% retrace would be down near 101.50, a level which has also been a previous reaction zone. A pullback this deep would support the ‘Inverse H&S’. A more shallow pullback, to just either the 23.6% or 38.2% fib level, might support the ‘Cup ‘n’ Handle’ scenario:

UJmonthly

U/J daily: I have adjusted the trend lines here now as per below:

UJdaily

Summary: the main take away for me from this analysis is that 124 is significant level for the USD/JPY. It could be the demarcation point for either a ‘Cup’ pattern or an ‘Inverse H&S’ pattern. Both patterns are bullish BUT both require a period of pullback and / or consolidation before any eventual breakout.

One thought on “USD/JPY: a broader technical look.

Comments are closed.