USDJPY Fails to Take Out Recent Highs Reverses

USD/JPY Fails to Take Out Recent Highs, Reverses

With the release of the ISM Manufacturing data earlier today, the markets were in risk off mode. As we discussed earlier, the ISM data was much weaker than expected, and the US Dollar sold off immediately. DXY sold off 50 pips and the SPX500 closed down nearly 1.5%. USD/JPY was another victim of today’s ISM data, down 30 pips on the day, after being up almost 75 pips before the data.

Source: Tradingview, City Index

There is a substantial amount of bearishness on the daily chart. Not only did the pair put in a double top at 108.46, but it also failed to take out previous support (which now acts as resistance) at the same level. That level also is the 50% retracement from the highs on April 24^th to the lows on August 23^rd. By putting in a double top, it also created divergence with the RSI, which is further concern that prices may move lower. The daily candle today is a bearish engulfing candle, in which the body fully engulfs the previous days candlestick. It had a false breakout above the descending trendline, which extends back to May 1^st.

Source: Tradingview, City Index

On a 240-minute chart, we can see that USD/JPY broke lower out of a short-term channel. Support comes at the 38.2% Fib retracement level from the August 26^th lows to the Sept 18^th highs (which are the same as today’s highs) AT 106.92. Next level of horizontal support is near 106.68. Below that level, there is room to head all the way back to 104.44. Resistance now is back at the rising trendline near 108.12. Above that, resistance comes in at the previous double top of 108.46. If price manages to get above there, the next level of resistance is the prior high near 109.37 from August 1^st. (This also happens to be the 61.8% retracement level from the previously mentioned timeframes on the daily chart)

As i mentioned earlier today, (and I’m sure we’ll be mentioning for the next few days) all eyes will be on the ADP Employment data tomorrow and the Non-Farm Employment data on Friday. These could be the next catalysts to drive the direction of the US Dollar.

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.