USD/JPY Daily Technical ahead of Japan GDP

Basil Fayadh from eToro USA at 02/12/10

 

Ahead of Japanese GDP data next , technically USD /JPY looks like it may be making a possible “reverse head and shoulders” on the daily chart. Next week there is some potential for volatility on the pair with Japan preliminary GDP due out at 6:50 pm EDT on Sunday February 14th, followed by a U.S. bank holiday on 02/15 (President’s Day) Japan GDP is forecast at 1.0% compared to its release earlier at 0.3%. With the pair trading just around 90.00 right now and in a current downtrend from its bounce of the 200 Day moving average and downtrend line right around .9375 on 1/8 and all the way down to 88.53 on 02/04 this downtrend could be the possible second shoulder of the formation. What we’re really looking for to confirm this formation is a breakout of .9280 with a close and open above this level for a few days on the daily chart potentially leading back up to the 97.80 level and on to 100.00. A fail again on are-test of the downtrend and moving average or a break below 88.00 could possibly yield back to 86.56 which was the recent low on 11/26/2009. Although Japan may possibly be benefitting from the global economic stimulus of more than $2 trillion, their wage rates are still falling and “Japan may be able to stave off a double-dip recession given exports have done better than expected,” said Takahide Kiuchi, chief economist at Nomura Securities Co. in Tokyo. “Still, it’s questionable whether a recovery in domestic demand without the stimulus is possible and the economy is still highly dependent on overseas demand, underscoring the fragility of the recovery.”

Terms:

head and shoulders A technical analysis term referring to a chart formation in which a price exhibits three successive rallies, the second one being the highest. The name derives from the fact that on a chart the first and third rallies look like shoulders and the second looks like a head.

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All views in this post are purely opinion and are not intended to be trading advice.