USDJPY has followed through beautifully from the February 3rd bullish breakout.
I covered this descending channel and the resulting breakout several times, and USDJPY hasn’t disappointed.
We even saw bulls secure a close above 132.90 on Tuesday, which opened up the next key resistance at 134.40.
That 132.90 level should be familiar to those who watched last week’s forecast as it’s the level bulls had to break to continue the rally.
Now USDJPY bulls are faced with a new test at 134.40.
The area has been a pivot for the pair since December, acting as support until the December 20th breakdown, flipping 134.40 to resistance.
We’ve seen USDJPY test this level for the last three sessions, including today’s brief spike above it.
But as many of you know, a daily close (using New York close charts) above 134.40 is needed to confirm the breakout.
A daily close above 134.40 opens up the next key resistance at 138.00, offering another 360 pips of bullish potential.
If we see today close below 134.40, the level remains as resistance for next week.
Remember, too, that Friday breaks can be deceiving, given the lack of volume.
So if USDJPY does close above 134.40 today, it wouldn’t be a bad idea to wait for Monday’s close to confirm the breakout.
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There are a number of factors which may
drive USD lower through 2023. First the US
is expected to enter into recession, at a time
where Europe may be recovering and China
expected to have exited from ZC policy. USD
performance is likely to be much more
subdued (and mostly negative) in a US only
recession. Second, when global leading
indicators (ex US) turn higher, there is
meaningful USD depreciation over the
following 12 months. There is likely to be
greater volatility in rates and FX over the
current quarter that sees in DXY in a 100-
108.00 range. For H2’2023 however DXY
may be back to 95.00-96.00.
Currently (as of Jan):
• DXY: 0 3m: 106.66
• DXY: 6 12m: 96.87
• DXY: LT: 96.61
• 6-12mths: Bearish DXY
Anything sub 125.00 may present an
opportunity to buy USDJPY short term.
H2’23 though may see more sustained gains
in JPY to 110-115 may Fed pivot toward rate
Currently (as of Jan):
• USDJPY: 0 – 3mths: 134.0
• USDJPY: 6 – 12mths: 120.0
• USDJPY: LT: 130.0
• 6-12mths: bullish JPY vs USD,
moderately bullish vs EUR
Vary nice strategy