Technical Tools

Support and resistance (S/R). Price levels, trendlines and Fibonacci retracements. Price action, candlestick and chart patterns. Simple moving averages (SMA). Commitments of traders (COT) indicator, which displays speculative positioning in FX futures market, used as a proxy for speculative positioning in spot FX market.

Weekly Chart


The pair broke below strong 115.50 - 116 support zone that was holding it since late 2014. Sharp decline has seen 100 week SMA taken out before it stalled near 2013 - 2014 trendline ahead of 110 big figure level. Broken support zone and 100 week SMA shall now act as a strong resistance.

Speculative Positioning

Net position of non-commercial traders in Japanese Yen futures flipped to the long side at the start of the year for the first time since October 2012. The effect of the late January short squeeze on positioning was small and the net long position is back at the highs (52.7K).

Daily Chart


Inability to continue above 200 day SMA and 122 level at the end of January resulted in a sharp reversal and subsequent break lower. The decline was worth more than 10 big figures at the lowest point. The pair appears to be carving out a double bottom but, without support from fundamentals, it may well fail.

Fundamentals

The BOJ adopted negative interest rate policy at their latest meeting. This was a good signal that they are prepared to do "whatever it takes" to defend Abenomics and are expected to do more in March. This shall support the pair in the near term but only time will tell whether it will stem yen appreciation.

Prediction

Taking into account all the above-mentioned factors, I expect the pair to be trading near 111.75 towards the end of the forecast period which will conclude on the 1st of April, 2016, at 12:00 GMT. Ideally, the pair will follow the expected price path as outlined on the charts.
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