Technical Analyst, Saxo Bank
USDJPY spiked to just above 160, specifically 160.27 (mid-prices), when it faced heavy selling that pushed the pair down below the 0.382 retracement of the uptrend since March (blue Fibonacci levels) to the 0.618 retracement of the April bullish move (red Fibonacci levels) at 154.42, testing the lower rising trendline in the process.
The strength indicator RSI is still showing positive sentiment without any divergence, indicating that USDJPY could move higher in the coming days or weeks.
However, if USDJPY breaks below 154.40, it is likely to encounter another round of heavy selling down to either the 0.786 retracement (red Fibonacci level) at 152.83, possibly down to the 0.618 retracement (blue Fibonacci level) at 151.75.
Potential upside target: USDJPY reached levels not seen since April 1990, which topped out at 160.32 - see the monthly chart. If USDJPY is pushed above that level, there is potential for a move up to the 1.618 projection of the October 2022 – January 2023 correction at 167.29, but a bullish move to the 2.00 projection at 176.77 should not be ruled out.
See also levels based on Elliott wave and Fibonacci levels in seperate section
The monthly RSI shows significant divergence (blue falling trendline), indicating that the uptrend is weakening. However, a close above its falling trendline would indicate USDJPY could move even higher than the current peak.
Elliott Wave count
Is this the final 5th Wave? It is an unusual 5th wave, highly irregular, while the other waves have been more normal.
However, it is often the case that either the 3rd or the 5th wave is irregular, but rarely both; in that regard, the 5th wave is not that unusual.
In terms of Fibonacci levels, the 5th wave is normally 0.618 of wave 1+3 but that level has long been surpassed.
It can also be a 1.618 projection of wave 4, which is also surpassed (green Fibo levels), but here the 2.618 projection at 173.09 can come into play.
Wave 5 looks similar to a 5th wave for commodities, i.e., an extended 5th wave that could push to a 1.382 extension at 172.41 (red Fibonacci levels), almost the same level as the 2.618 (green) extension level at 173.09.
Added to that, indicators such as RSI and MACD consistently show divergence during the 5th wave move. This is also the case here, with both RSI and MACD indicating uptrend exhaustion.
Conclusion: There is further upside potential if USDJPY pushes above today’s peak but a break below 154.40 could seriously demolish that picture.
A close below 140.20 will reverse the long term bullish trend.
2024: The wasted year
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
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.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
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.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.