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USDJPY

USDJPY is still in the grip of a powerful bearish trend, and that selling pressure has now seen major support at 86.97 (1 Jul low) overwhelmed into submission, opening up the possibility of another plunge back towards the November 2009 low of 84.83 in the coming days.

On the hourly chart, we see a potential bearish pennant pattern in play which would suggest going short on a break below 86.55, and aiming for a target of 85.60. Strong selling interest is likely to precipitate back up towards 86.97 so a sensible stop level seems to be just above 87.00.

Even a feisty short squeeze higher is unlikely to have the gumption to overcome the supply left lurking around 88.00, 89.15 (12 Jul high), and 89.50 (28-29 Jun high). As such, the risk-reward profile strongly favours short positions, although we assert one cautionary note that despite the downside being by far the path of least resistance, the BoJ could be waiting in the wings to prevent an all-out USDJPY collapse –and if they do step in to sell JPY, don’t expect a gentle ride back higher.

USDJPY is still in the grip of a powerful bearish trend, and that selling pressure has now seen major support at 86.97 (1 Jul low) overwhelmed into submission, opening up the possibility of another plunge back towards the November 2009 low of 84.83 in the coming days.

On the hourly chart, we see a potential bearish pennant pattern in play which would suggest going short on a break below 86.55, and aiming for a target of 85.60. Strong selling interest is likely to precipitate back up towards 86.97 so a sensible stop level seems to be just above 87.00.

Even a feisty short squeeze higher is unlikely to have the gumption to overcome the supply left lurking around 88.00, 89.15 (12 Jul high), and 89.50 (28-29 Jun high). As such, the risk-reward profile strongly favours short positions, although we assert one cautionary note that despite the downside being by far the path of least resistance, the BoJ could be waiting in the wings to prevent an all-out USDJPY collapse –and if they do step in to sell JPY, don’t expect a gentle ride back higher.

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