12 Nov 2013
Flash: USD/JPY upside risk consistent with maturity of the triangle - JPM
FXstreet.com (Barcelona) - While upside risks for USD/JPY remain intact, an extension of the consolidation phase is likely for now, notes Niall O'Connor, FX Strategist at JP Morgan.
Key Quotes
"While the broad range continues to develop for USD/JPY, the false breakout above key resistance levels and late-week reversal implies an increased risk of additional consolidation. With the price action suggesting an upside break may be on the back burner for now, the overall view for an eventual bullish break is unchanged. Despite the false breakout, key support levels are intact."
"In this regard, the 97.70/30 zone remains important as it includes the triangle trendline support from the June low. Note this area should continue to hold if USD/JPY can see a more immediate upside break. The 99.41 weekly high will now act as the key upside hurdle and define whether prices are staging a bullish breakout."
"Alternately, violations of key support levels would shift the focus back to the October lows near 96.94/96.55 while raising the risk that a deeper retracement can develop. Still, we recognize that Friday's break above the key 99.00 resistance area which included the October high should have led to a more sustained recovery phase."
"This is consistent with the maturity of the triangle pattern which appears to have completed five swings from the May peak. In turn, the reversal from the October low had bullish expectations in line with our current long recommendation."
Key Quotes
"While the broad range continues to develop for USD/JPY, the false breakout above key resistance levels and late-week reversal implies an increased risk of additional consolidation. With the price action suggesting an upside break may be on the back burner for now, the overall view for an eventual bullish break is unchanged. Despite the false breakout, key support levels are intact."
"In this regard, the 97.70/30 zone remains important as it includes the triangle trendline support from the June low. Note this area should continue to hold if USD/JPY can see a more immediate upside break. The 99.41 weekly high will now act as the key upside hurdle and define whether prices are staging a bullish breakout."
"Alternately, violations of key support levels would shift the focus back to the October lows near 96.94/96.55 while raising the risk that a deeper retracement can develop. Still, we recognize that Friday's break above the key 99.00 resistance area which included the October high should have led to a more sustained recovery phase."
"This is consistent with the maturity of the triangle pattern which appears to have completed five swings from the May peak. In turn, the reversal from the October low had bullish expectations in line with our current long recommendation."