USD/JPY slips to monthly S1 at 112.04

FX_IDC:USDJPY   U.S. Dollar / Japanese Yen
USD/JPY slips to monthly S1 at 112.04

Contrary to trade patterns theory, the currency rate did not make a breakout from the falling wedge formation to the north. Moreover, the safe haven Yen was quoted higher despite release of disappointing trade data. For this reason, the fall of the rate was most likely based on worries about vote for the new tax reform and Merkel’s failure to form a new government. On the one hand, the fact that the monthly S1 located at the 112.04 level sustained under such heavy pressure indicates on an upcoming recovery of the buck, which will tend to reach the 112.62 mark. This scenario is partially supported by the aggregate market sentiment, which is 59% bullish . On the other hand, the falling moving averages are likely to continue pushing the pair to the bottom in the nearest future.
Comment: USD/JPY expectedly surges to 112.62

In line with expectations, the currency exchange rate has successfully reached the 112.62 mark. But as this level was protected by the weekly PP, the pair was forced to retreat. Currently, it is fluctuating in a limbo between the 55- and 100-hour SMAs. Unless the buck receives a proper impulse it has little chances to break to the top.

However, even if such momentum will be created the surge is not expected to exceed the 113.10 mark, which represents location of the 200-hour SMA. From the opposite direction an equal role plays support area located around the monthly S1 at 112.04. Generally, there is a need to keep in mind that the aggregate market sentiment is bearish and the pair is fluctuating in a medium-term downtrend.

Comment: USD/JPY approaches monthly S2

As there were no fundamental events that could positively affect value of the buck, the currency exchange rate continued moving to the bottom under the pressure from the 100-hour SMA. Right now the currency pair is facing no obstacles to reach the monthly S1 located at the 112.04. Under normal circumstances the rate would make another rebound. However, in this particular case the clash most probably will match with release of data on the US Core Durable Goods Orders, which might either speed up the rebound or bolster the breakthrough.

The second option seems more viable from the point of view of new descending channel that consist of two reaction highs and two reaction lows. But even if the pair goes in the opposite direction, it is not expected to climb above the 112.62 resistance level.

Comment: USD/JPY falls to 111.10

In line with expectations, a release of data on the US Durable Goods Orders as well as the Fed Meeting Minutes only bolstered the breakthrough through the monthly S1 at 112.05. In result of the downfall, the Dollar lost 0.8% against the Yen and was stopped only by the bottom boundary of the currently active descending channel near the 111.10 mark.

As the pair still remains within the pattern, the buck is expected to start a gradual recovery. But to due to beginning of the Thanksgiving holidays and reduced liquidity the surge might be postponed even until the next week. To put it differently, this trading session the currency pair is likely to spend fluctuating between the weekly S1 at 111.40 from the north and support near the 111.10 from the south.

Comment: USD/JPY tests 55-hour SMA

Due to beginning of Thanksgiving holidays in the United States, which led to reduced liquidity, the currency rate indeed spent previous trading session between the weekly S1 at 111.40 and support at the 111.10 level. But as it made a rebound from the bottom trend-line of a two-week long descending channel, in first hours of this trading session the surge resumed. At the moment, the pair is the testing the 55-hour SMA, which might lead to short-term retreat.

Nevertheless, this barrier should not prevent the pair from reaching the opposite side of the pattern. Thus the general question is whether the buck will manage to soar to the pre-fall 112.10 level or it will be forced to make another rebound amid additional pressure exercised by the falling 100-hour SMA as well as the monthly S1 at 112.05.