USD/JPY (4-hour chart) as of Monday (8/08/2011) has continued its steady, yen-strengthening fall after spiking late last week to a high of 80.22 on the heels of intervention by the Bank of Japan. This yen re-strengthening after the central bank’s attempt to weaken the yen essentially indicates that the intervention has had very little lasting impact on the upward trajectory of the Japanese currency. The fact that USD/JPY has dropped below key 78.50 support once again is an important bearish indication. As USD/JPY continues to move to the downside, the risk of further yen intervention continues to loom. The key downside target currently continues to reside around the significant 76.50 support region. Further intervention notwithstanding, USD/JPY could continue its overall downtrend slide. In the event of a subsequent strong breakdown below 76.50, a longer-term target to the downside resides around the 74.00 price region, which is around the 161.8% Fibonacci extension of last week’s bullish correction.
(Click on chart to enlarge. Forex chart key: price on 1st pane, Stochastics 14,3,3 on 2nd pane; horizontal support/resistance levels in black; uptrend lines in green; downtrend lines in red; 50-period simple moving average (SMA) in orange; 100-period SMA in brown; 200-period SMA in dark blue; Fibonacci levels in magenta.)
James Chen, CTA, CMT
Director of Technical Research and Education