Quarterly Outlook
Macro Outlook: The US rate cut cycle has begun
Peter Garnry
Chief Investment Strategist
Technical Analyst, Saxo Bank Group
Summary: USDJPY has broken resistance level. No strong resistance until 147. But can it move that high? Read this analysis where I dig deep into the bigger technical picture
USDJPY is breaking higher in what looks like a steep rising wedge formation. In June closed USDJPY above its strong resistance at around 135.18 but daily RS indicated we could see a correction before moving higher.
But with the move higher today that correction seems to be very small. USDJPY is likely to test the upper rising trend line in the wedge like pattern.
RSI will then most likely test its falling trendline. If closing above USDJPY will likely move higher.
If USDJPY breaks bearish out of the wedge we can expect a correction down to around 131.50 as a minimum
135.18 was the peak in January 2002, it is 1.382 Fibonacci projection of the Symmetrical Triangle ABCDE corrective pattern, and if we take the peak to bottom of the Triangle and add that difference to the break-out price (illustrated by the two vertical arrows) we get roughly 13520.
RSI (Relative Strength Index) has also reached and actually surpassed the level as it did at last peak before USDJPY started forming the corrective Triangle pattern. Going back 30 years every time, the RSI has reached values around 80 a larger correction has set in. At the time of writing, it is +85.
However, the two other times where RSI was around 80 value the correction did not occur before divergence had been recorded. There is currently no divergence on RSI during this uptrend i.e., we could see higher levels. From the Monthly chart we can see that there is no strong resistance until around 147.65. 1.618 projection of the triangle is at around 142.57.
If this is the last exhaustive leg higher – a possible vawe 5 – is has already surpassed 0.764 (at 136.05) of vawe 3. If it will be the same length as vawe 3 is should reach 147.65. Usually vawe 3 is the longest but we do see vawe 5 sometimes is equal to or longer than vawe 3.
Bottom line: USDJPY could reach 142-147 in an exhaustive move. RSI has not yet shown divergence which supports the much higher price level in USDJPY. But do expect volatility.
Disclaimer
The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.
Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-gb/legal/disclaimer/saxo-disclaimer)