USD/JPY – Key Support and Central Pivot at 118.20

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USD/JPY - Key Support and Central Pivot at 118.20

NFP Reaction: The USD/JPY fell at the end of last week after the NFP jobs report disappointed. However, let’s not be too fast in appraising a bearish outlook and monitor the price action this week for more clues.

USD/JPY 4H Chart 4/6
usdjpy nfp
(click to enlarge)

Bears not so Impressive Bullish Scenario: The 4H chart shows the NFP reaction. The 4H candle around the reaction was sharp, but there was not follow-through below 118.75 yet. Let’s say there is a pullback. A bearish market should find resistance at 119.50. However, if USD/JPY breaks above 120, we are very likely going to see a bullish continuation. It would basically reflect a market shaking off the poor jobs data. In this scenario, we can anticipate an attempt to push towards 121.70 (2014-high) to 122.00.

Bearish Scenario; Central Pivot: Let’s say price holds under 119.50 for the most part, forgiving some intra-session violation as long as it comes back below 119.50 within the next session. This would reflect bearish control and put pressure on a key support around 118.20. This is a previous support pivot, and also the central pivot of the multi-month consolidation range seen in the daily chart.

USD/JPY Daily Chart 4/6
usdjpy daily chart 4/6
(click to enlarge)

Range Support: A break below 118.20 would essentially keep the USD/JPY in consolidation in the medium-term, and open up a short-term bearish outlook towards the 115.56-116 range support area.

Double Top or Just a Consolidation Range? Now, the USD/JPY is bullish in the long-term or at least since making the record low of 75.56 in late 2011. So, we should respect the 115.56-116 consolidation range support if 118.20 does not hold as one.

This also means that a break below 115.50 would complete a double top in USD/JPY and signal the evolution of its medium-term consolidation into a more bearish correction mode. This scenario, would open up the 110 handle and previous resistance area back in September/October 2014.

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Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.