Japanese Yen Technical Outlook: USD/JPY, EUR/JPY, GBP/JPY

Japanese Yen Talking Points:

• USD/JPY has continued to build structure within the Fibonacci retracement taken from the July-September sell-off, with both last week’s high and this week’s low printing at retracement levels. I looked at a Fibonacci level in last week’s Yen analysis article that has since held the highs from the breakout, and that remains a spot of interest moving forward.
• EUR/JPY has held up well despite the drubbing in the Euro elsewhere, but there’s been a build of lower-lows and lower-highs that makes the pair more attractive for Yen-strength scenarios.
• GBP/JPY was featured in yesterday’s webinar and the pair continues to show inflections from the gap drawn from the 2008 Financial Collapse, with 193.61 helping to set yesterday’s low and leading into a strong bounce.

The next big fundamental item for the Japanese Yen is expected in about a month with the bank’s policy review. This could have sway over whether the bank takes a more-hawkish turn into 2025 but, at this point, Yen-weakness has held fairly well in a variety of venues.

USD/JPY continues to track DXY themes well and given this morning’s rush of USD-strength, USD/JPY has similarly bounced from yesterday’s low. That low printed at the 61.8% Fibonacci retracement of the July-September sell-off and this comes a few trading days after the 76.4% retracement of that same move helped to set the high.

EUR/JPY, on the other hand, could have a more bearish appeal and that’s something that can align with Yen-strength scenarios, particularly if that policy review next month has a hawkish tilt. Below, I go over each of the three pairs in more depth.

USD/JPY

The US Dollar ran into some big resistance last week at the 107.00 handle and for the first two days of this week, that continued into a pullback. But bulls were back this morning and that’s pushed DXY back into that prior gap. Along the way, USD/JPY has mirrored that strength well, so I’m considering this a setup for Yen-weakness scenarios and that would likely need to be coupled with some expectation of the US Dollar pushing deeper into resistance and perhaps even breaking above the two-year range.

At this point, there’s reference from the Fibonacci retracement produced by the July-September sell-off. The 76.4% retracement of that mov held the highs last week and then the 61.8% retracement held the lows yesterday, plotted at 153.41.

USD/JPY Daily Price Chart

USD/JPY Shorter-Term

From the four-hour chart there’s been an element of defense around prior resistance and that aligns with the 155.00 psychological level. This would be the spot that ideally buyers would hold support at or above to keep the door open for topside continuation scenarios.

USD/JPY Four-Hour Chart

GBP/JPY

While there’s a couple of different fluid items on the above setup of USD/JPY, GBP/JPY presents a similar scenario of interest for Yen-weakness backdrops. The British Pound was hammered against the US Dollar in early-Q4 trade, but the move was a bit more controlled in GBP/JPY. It’s what’s happened over the past couple days that’s of greater interest, however.

The pair pulled back to test a level at 193.61 yesterday, which is the bottom of a gap from back in 2008. I looked at this in the webinar shortly after the support test and bulls continued to go to work after, driving a trough-to-peak move of more than 400 pips. The top of that gap at 198.08 has had some recent pull, as well, as this helped to set the weekly high over the past four weeks.

GBP/JPY Monthly Chart

From the weekly, taking a simple look at the matter with that prior gap, we can see where that 198.08 level was a stumbling block for bulls over a four-week period. But, the pullback from that has so far held support at 193.61 and there’s been a re-test of the 200-day moving average that’s also had some interesting scenarios of resistance-turned-support of late.

GBP/JPY Weekly Chart

GBP/JPY Near-Term

It’s the four-hour chart where this one gets more interesting, as the bounce from 193.61 has since pulled back, and so far, we have support holding at prior swing resistance of 196.15.

GBP/JPY Four-Hour Chart

EUR/JPY

While both USD/JPY and GBP/JPY above are trading above their 200-day moving averages with recent support tests or inflections, EUR/JPY tested its own 200-dma last week and that held as resistance. That was also confluent with the 165.00 level and then yesterday, when USD/JPY was testing support at 153.41 and GBP/JPY was testing 193.61, EUR/JPY set a fresh lower-low with a breach of the 161.93 prior support level.

While there’s been a bounce here, as well, the current daily bar is still red whereas both GBP/JPY and USD/JPY are showing green daily candle bodies, at this point.

For Yen-strength scenarios, EUR/JPY appears a bit more promising than either of the pairs looked at above. Also notice that confluent resistance at 165.00, as I’ll expand on that when I take a shorter-term look at the matter next.

EUR/JPY Daily Price Chart

EUR/JPY Shorter-Term

Another difference here is that while both USD/JPY and GBP/JPY above have pulled back to support at prior resistance, EUR/JPY has dug a bit deeper on a relative basis. The lower-high before yesterday’s sell-off was at 163.90 and this morning, price tested all the way down to 163.21. The bounce from that I testing a swing level at 163.70 but it’s the 163.90 level lurking above that would be an ideal spot for bears to hold to keep the door open for shorter-term bearish momentum.

But, on a broader basis, it was 165.00 where bulls failed last week and that’s the price that would need to remain respected to keep the door open to deeper bearish potential. This still plots very near the 200-day moving average so there’s still an element of confluent taking place.

EUR/JPY Four-Hour Price Chart

--- written by James Stanley, Senior Strategist