USD/JPY - Yen Surge Showing No Sign Of Abating

Includes: FXY, UDN, UUP
by: Dean Popplewell

The yen has been flying again on Thursday, after the prospect of intervention in the currency markets to stem its appreciation was played down by a number of officials including Prime Minister Shinzo Abe.

The comments in recent days has sent USD/JPY into something of a free-fall, first smashing through 1.11 - a key level of support over the last couple of months - to trade at its lowest level since the Bank of Japan expanded its quantitative and qualitative easing (QQE) program in October 2014.

The decline is currently showing no signs of abating with the MACD and stochastic showing downside momentum building - confirming the move - and the pair trading near its daily lows, now down 1.7% on the day.

Potentially more bearish is the weekly chart, with the candle also currently (only completed candle matters!) a marubozu. Moreover, the lagging line on the Ichimoku chart has this week broken below cloud (Senkou) span B, which confirms the move into bearish territory on the weekly chart.

The next obvious potential support zone for the pair comes around 105-105.50, with this having been an important support and resistance region on the way up.

That said, prior to this, it could run into support around 106.50 - the 38.2% Fibonacci retracement of the move from October 2011 lows to last June's highs.

What's more, this roughly coincides with the more aggressive projection (red line) from the break of the head and shoulders which formed between November 2014 and February this year (the move from the head to the neckline, projected below it).

Below here, 103.75-104.10 could be key, having been a notable resistance zone throughout the first two thirds of 2014, followed by 100.50-101.00 - major support throughout 2014 and the 50% retracement of the above Fib move.

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