USDJPY: Bulls eye potential 250-pip move

<p><strong>By <a href="http://investmacro.com/contributors/contributor-profile-forextime/">ForexTime</a> </strong></p>
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<li>USDJPY bounces off neckline of double bottom</li>
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<li>Upside presents a potential 250-pip move</li>
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<li>US inflation data on Thursday in focus</li>
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<li>Support at 200-EMA &amp; resistance at 50-EMA</li>
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<h3>USDJPY bounced off the neckline of a daily double-bottom pattern after data showed inflation in Tokyo cooled for a second month in December.</h3>
<p>Consumer prices <strong>slowed to 2.4% in December from 2.6% in the previous month.</strong> The core which excludes fresh food and energy prices cooled to 3.5% – its fourth consecutive month of decline. This data is likely to encourage the <strong>BoJ to retain its negative rates this month.</strong></p>
<blockquote><p><strong><em>According to Thomas Bulkowski, in his book “Encyclopaedia of Chart Patterns”, this kind of double bottom pattern, (Adam and Adam) has</em></strong></p></blockquote>
<h3>·       <em>A 16% breakeven failure rate.</em></h3>
<h3>·       <em>A 73% chance of meeting its target.</em></h3>
<p><img fetchpriority="high" decoding="async" class=" lazyloaded" src="https://www.forextime.com/s3-static/users/user17/USDJPYDaily%204.png" alt="" width="1000" height="800" data-entity-type="file" data-entity-uuid="2fdf6e9c-baa0-4381-b121-2439d744c189" data-src="/s3-static/users/user17/USDJPYDaily%204.png" /></p>
<p>Worthy of note is the neckline crosses across a confluence of significant support levels which include.</p>
<h3>· 143.674: The 200-day Exponential Moving Average (EMA)</h3>
<h3>· 143.170: The 61.8 golden Fibonacci ratio (w<em>ith Fibonacci retracement levels drawn from December 19th’s high to December 28th’s low).</em></h3>
<blockquote><p><em>At the time of writing USDJPY is bouncing off the 200-day EMA</em></p></blockquote>
<p><strong>The next key fundamental driver</strong> that may influence the currency pair will be the <strong>US Consumer Price Inflation data (CPI) due on Thursday.</strong> Headline inflation is expected to have ticked higher in December, while the annual core inflation is seen cooling to 3.8%. More signs of cooling inflationary pressures may stimulate Fed cut bets, weakening the USD as a result. <strong>USDJPY may remain range-bound as it waits for an injection of fresh volatility.</strong></p>
<h3>Redirecting our attention back to the technical…</h3>
<p>If the neckline is not broken, USDJPY may rally for about 280 pips and contend with the following key resistance levels ahead.</p>
<h3>· 144.853: <em>A significant level close to the 100 Fibonacci retracement</em></h3>
<h3>· 145.477; its 50-day EMA.</h3>
<p>However, if the Yen’s strength continues after the latest inflation data from Japan, we may see the confluence of key support levels give way.</p>
<p>The following levels may provide a temporary pause as it aims for new lows below the December 28th low of 140.29.</p>
<h3>· 142.618: the 50.0 Fibonacci level</h3>
<h3>· 142.066 the 38.2 Fibonacci level</h3>
<h3>· 141.383: the 23.6 Fibonacci level</h3>
<p><img decoding="async" class=" lazyloaded" src="https://www.forextime.com/s3-static/users/user17/USDJPYDailyfib.png" alt="" width="1000" height="800" data-entity-type="file" data-entity-uuid="30fc5919-184a-47a7-b8d4-f7cf6e247667" data-src="/s3-static/users/user17/USDJPYDailyfib.png" /></p>
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