21 August, AtoZForex.com, Vilnius – Fundamentals rule the safe haven Yen, thus with a supportive background following the formation of Adam & Eve, a 450 pip fall could be expected from USDJPY weekly.
Failing to breach through Fibonacci 123.6% retracement level has left Yen falling like an apple. Currently the price tests a combination of 100% Fibonacci retracement level and an upward sloping monthly trend line.
The fall has formed an Eve second top, finishing the Adam & Eve double top formation. However, to confirm it, a daily candle will need to close below the pattern's low at 120.4. From that point on, we can expect a 260 pips drop to a level of 117.7. It can be noted that the move has a 69% chance to reach the set target.
For now, having both 50 and 200 hour SMA’s sloping downward, the bear market could be re-entered at a local low, just below the monthly upward trend line at 121.7 and aimed towards a first take profit at 121.2 and a second at the confirmation line at 120.4. A stop loss of around 50 pips could be used.
Currently, alternative long positions would not be advisable, however, more opportunities might arise by the 120.4 level.
Massive JPY buying with USD and CNY have flooded Yen, as FOMC has essentially confirmed no-hike in September and the US fundamental data does not support a December rate hike either. Meanwhile, China's lowered fixing mechanism and contracting economy means currency outflows to the neighboring safe haven. Moreover, further CNY devaluation could be expected amid the ongoing "trade war".
Therefore, safe havens such as JPY and CHF can be expected to continue appreciating until stability signs crop up from the troubled countries.
Fundamentals to look for next week:
- Tuesday's US CB Consumer Confidence;
- Thursday's US Prelim GDP q/q.