Invast Blog

EUR/JPY, GBP/JPY, USD/JPY Technical Outlook for the week 7th– 14th April 2015

In recent weeks we have observed a weaker USD and strength returning to both the EUR and GBP. Despite the recent recovery we still believe the recent rally to be a mere technical correction rather than signs of potential reversals in the currency market.

As we pointed out in the AUD/JPY report last week, we see key resistances performing what it should have done in preventing further rises in Major Yen crosses. Fundamentals are stabilizing as most central banks have sent a clear intention in regards to their monetary policies for 2015.

Major Yen crosses are now at a crossroad from a technical standpoint and could lead to major trend resumptions should it be able to overcome the key levels most traders are paying attention to. As we enter the second quarter of 201, I think it’s appropriate to revisit these key levels to better our view of the market.

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EUR/JPY short term outlook

EUR/JPY rise in recent weeks still falls under the category of a healthy retracement with 131.75 acting as the key resistance in the immediate future. This level also represents 50% of the last drop in EUR/JPY in the month of February 2015. One thing we need to point out is the possibility for EUR/JPY to actually break this level should it be able to maintain a position above 131.00 in the short term.

EUR/JPY trading above 130.00 would constitute a break of the short term resistance trendline from early February that has kept the pair from progressing any higher. Such scenario would likely lead to a potential break above 131.75 and trigger a run towards 133.00 where the 61.8% Fibonacci retracement is located as well as the Ichimoku cloud region on the daily time frame. Stochastic on the Daily chart does suggest a potential for further run to the upside with enough momentum to break 131.75 at the very least.

Keep in mind though that the overall trend for the pair remains to the downside for as long as it trades below the Ichimoku cloud on the daily chart. Additional momentum to the upside will likely be capped at the resistances mentioned above, with 133.00 as the key level that could limit further progress to the upside.

We prefer to look for buys in the short term towards 131.75 and 133.00, however position traders would be better off waiting for a stronger rejection and momentum exhaustion at around 133.00.

EURJPY DAILY

Chart courtesy of Invast cTrader

GBP/JPYShort term outlook

GBP/JPY unlike the overly bearish EUR/JPY remains in more of a range bound market condition. One thing to note that the range in 2015 alone is already close to 1000pips in value ranging from 176.00 to 186.00. This proves to be a nightmare for long term position traders but for short term traders this price movement in the first quarter of 2015 provides significant key levels to trade around with.

Notably we have a significantly strong support at 176.00 and while the daily chart does indicate that the pair is traded below the Ichimoku cloud, we see the potential for GBP/JPY to continue to push up towards the key resistance clusters between 180.00 and 182.00.

A daily close above 178.00 will likely trigger this run and we look to buy GBP/JPY on a daily close above 178.00 with a stop loss at 176.00 and targets ranging from 180.00, 181.00 and 182.00.

182.00 itself is the key level that could change the outcome of GBP/JPY in 2015. A break above will see the pair continue towards the upper range at around 186.00, however a rejection at 182.00 will send the GBP/JPY spiralling even quicker than the last drop in February 2015.

GBPJPY Daily

Chart courtesy of Invast cTrader

USD/JPY Short term outlook

Recent weakness in the US Dollar puts the USD/JPY at risk of potentially confirming a bearish chart pattern. With the daily chart indicating signs of a potential Head and Shoulders pattern. The key level that could trigger the selloff is located at 118.75 which represents the neckline of the head and shoulder pattern.

For now though looks like USD/JPY is maintaining a stronghold on that support there as the recent bounce manages to take lift it off away from the level, however one thing to note here is that a breach of 120.50 shoulder line is needed to negate the head and shoulder pattern.

For now short term traders can trade between 120.50 and 118.75, and in the short term we prefer to go long USD/JPY with a stop at 181.50 just slightly below the neck line with targets just slightly below the shoulder line at 120.25.

Always be aware that should the range between 118.75 and 120.50 be broken we are likely to see a trending environment rather than the range bound market condition in USD/JPY we have observed in the first quarter of 2015.

USDJPY DAILY

Chart courtesy of Invast cTrader

These are our initial impressions only, please make sure you read all disclaimers on this website carefully. If you have any questions, please contact the Invast staff for more details.

Contributing author:

Vito Henjoto
Technical Analyst
@vhenjoto

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