Technical Analyst, Saxo Bank
Summary: USDJPY and CADJPY have formed bottom and reversal patterns, reverse to uptrend or merely just a correction? EURJPY triangle pattern - break out needed for direction.
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USDJPY has formed a morning Doji pattern (circled) which is an indication of a bottom and reversal. A reversal that will have overhead resistance with the 21 and 100 daily Moving Averages coming down. However, a spike up to the 0.618 retracement at around 134,75 could be seen.
Medium-term USDJPY is in a downtrend but if the week ends with a close above 132.10 weekly candle will have formed a Bullish Engulfing candle which will have potential to reverse the bearish picture. However, to reverse to a medium-term uptrend a close above 137.95 is needed. However, if USDJPY closes above the 55 moving average it is a strong indication that use UDJPY will revert to bullish trend.
Weekly RSI is showing negative sentiment indicating USDJPY downtrend is not yet over. Bottom line; technical picture is a bit muddy.
A move below 129.60 will result in the downtrend to resume with a likely test of the 127 level.
EURJPY seems to be forming a medium-term symmetrical triangle easier seen on the weekly chart.
Weekly RSI has been showing divergence for months but if EURJPY breaks bullish out of the triangle and above 145.60 that is likely to be traded out and EURJPY to move to 152.60.
EURJPY is above the weekly cloud and 55 weekly MA i.e., in uptrend, but if the pair breaks bearish out of the triangle and closes below 138.80 a move down to around 135 could be seen with support at around 137.40.
Short-term EURJPY seems indecisive jumping above and below all Moving Averages and the cloud (shaded area) . However, RSI is showing positive sentiment and MACD line is about to cross over the Signal line which indicate upper falling trendline in the triangle is likely to be tested.
CADJPY started the week with forming a Bullish Engulfing candle after dipping below support at around 94.65. Short-term bounce to the 0.618 retracement at 98.27 seems likely. However, there is overhead resistance in the form of 21 and 55 MA’s coming down.
Medium-term on weekly CADJPY is in the process of forming a Bullish Engulfing. RSI divergence supports the bounce that could end with CADJPY resuming uptrend. A close above 100.90 will confirm that scenario. If that plays out CADJPY has formed a Double Bottom pattern with upside potential to 106-107.
If CADJPY slides back to close below 94.65 down trend is to resume. Support at around 92.65 but downside risk to support 87.00
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As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
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