Technical Analysis: Dollar and the Yen – All eyes on U.S Jobs report on Friday

  • The U.S market dollar index (DXY) has broken below 94.00. Weaken dollar is set to continue.
  • The Japanese yen was slightly weakened after a long bout of strengthening since March 2020.
  • All eyes are on the upcoming Non-Farm Payroll release on 7th August 2020

Figure 1: Dollar Index – Third wave has been completed upon reaching 161.8% expansion level.

Dollar index has successfully declined to our 1st target at 92.93, which is at the 161.8% expansion level which we stated on 27th July report . The bullish candle reacted strongly at the level and as such, we believe that there will be further upside to re-test the support turned resistance zone at 94.64-95.22.

Should Dollar index break below 92.00 in the next 3 periods without a rebound, the next target will be at 91.05, which is the 200.00% expansion level. This will indicate that the 3rd wave will enter into an extension.

Figure 2: USDJPY – Uplift is temporary

The unexpected dollar rise on Friday has given the yen some weakening effects which the Bank of Japan always wanted. However, the good news may not last for long as USD/JPY fails to close above 106.00 resistance at the last hour. Even if there is a strong upside, prices will likely be capped at the next resistance highlighted at 107.285-107.530.

Another factor to consider is that current price action indicate that the pair is trending downward within the channel and prices has been trending below the 50 and 200-day period moving average. The next likely rebound will be at 101.97-102.38 regions.

Figure 3: GBPJPY daily chart – Ascending channel is corrective in nature

The GBP has been rising steadily against the Japanese yen since Mid-June and the bullish bias will continue as recent price action suggests that GBPJPY has broken above the 200-day moving average last Friday and is on the course to test the psychological resistance level at 140.00. The rounding bottom formation will give the pair a bullish boost to break above 140.00. However, the price action also suggest that the upside is corrective in nature hence the pair will reverse course once key resistance levels has been met.

Should 140.00 breaks, the next level GBPJPY is testing will be the resistance zone at 142.58-143.59.

Figure 4: GBPJPY daily chart – Elliott wave suggest that the pair is forming a running flat corrective pattern

Like the British Pound, the Euro has been rising steadily against the Japanese Yen and after a slow recovery in mid-June, the formation of a potential running flat is evidently present based on the price action. Price has broke the immediate resistance level at 124.43 last Friday and the next desired resistance zone will be at 127.2% extension level which is the (b) waves ideal target for running flat. Next, the formation of the Golden cross will push EURJPY towards higher level.

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