With the Japanese Yen having offered safe-haven status for global investors (ironically enough, considering the zombie-like markets created by gargantuan BOJ intervention), the USD/JPY pair has often acted as a confirming indicator or signal, when correlated against the broader market. With markets beginning to falter in the face of renewed fears of a second COVID-wave, coupled with overall USD weakness as a result of continued dollar debasement courtesy of Fed stimulus, we make the case that the Yen is headed for further strength against the USD.
As we look at the JPY/USD Weekly chart, we note that price has been bound within a range (112.00-104.00) for the past 12-14 months. As we track further back in time, the upper band is extended slightly higher to approx 114.60, with solid resistance demonstrated as far back as early 2017.
Aside from the pandemic induced volatility in March, which saw price spike as low as 101.12, price has been fairly well compressed between the upper and lower bands of 112.00 – 104.00 in recent times.
These bands, on the Weekly chart, are shown via the IcarusAutoSupportResistance Lines, highlighted as the Red dotted lines, and are currently located at the following values:
- 114.66
- 111.40
- 107.57
- 104.65
On the Weekly Chart, we note that the Icarus Oscillator has shown a change in direction, below the zero-value control line. After a brief attempt at strength (Yen weakness), indicated by the three consecutive green dots, the Icarus Oscillator has presented the first of a new down-trend/direction change indication. Previous examples of this particular circumstance being somewhat predictive are marked with arrows for easy reference. A Green arrow identified a change in Oscillator conditions pointing to a move UP, and a Red arrow identified a change in Oscillator conditions pointing to a move down. See image above.
In previous examples, further support for the long-thesis (as marked by green arrows) has been confirmed by the appearance of the IcarusReversals indicator, and price closing above the upper bands.
Looking at the Daily chart below, we identify a range of supporting elements to confirm the longer-term outline provided by the Weekly chart, and current fundamental analysis relative to geopolitical and general market impacts.
In recent days, price-action has produced the appearance of the Icarus Reversals indicator, with several closes below the set ATR band thresholds. The Reversal signals are identified by the white down arrows, with the associated Icarus ATR bands shown with orange/red horizontal lines.
At the time of writing, price is also below the 107.73 level identified in the Weekly chart, although we note that some resistance has been identified by the IcarusOscillatorLevel at 106.84. This is identified by the thin orange dotted line At the time of writing, price is printing 106.89
The small range days in previous bars are likely related to the heavily documented ‘quad-witching’ of last Friday (19th June) causing a compression in many instruments’ overall activity levels. Now that this has passed, we expect to see a return to broader ranges.
We will look for an entry based on a CLOSE of price below the previous day’s low, and a close below the IcarusOscilatorLevel, marked as 106.84.
The 1HR Chart also shows price closely hugging the Daily Trend-lines, with the lower IcarusBollingerBand correlating with the proposed entry value of 106.84.
- Stop Loss (S/L) will be placed above the Weekly resistance level of 107.73, which correlates with the upper OscillatorLevel of 107.78. The S/L will be regarded as ‘soft’ meaning that we require a CLOSE above this level to exit on the open of the following bar.
- Take Profit (T/P) will be set at 104.65, or the trade will be closed upon either weak-progress thresholds, a change in Oscillator conditions and/or the appearance of other inverse Icarus indicators.
Risk = 89 pips
T/P = 2.19 pips
R/R Ratio = 2.46