Technical Analyst, Saxo Bank
Both USDJPY and EURJPY are closing in on 150 level. Price levels not seen in years. Trend is strong but indicators suggest it is stretched.
USDJPY has formed an almost text book 5 wave uptrend pattern with the current uptrend as an extended fifth vawe
USDJPY broke above its 2011 peak and resistance at 147.65. The 147.65 resistance was also within few pips of the 0.786 length of vawe around 147.25 and close to the 1.764 projection (146.51 to be exact) of the correction from 2015 peak to 2016 trough. 200% or 2.0 projection of that correction is at 152.90 which would then be next possible target for USDJPY.
If vawe 5 is to be as long as vawe 3 USDJPY is looking at 157.68.
However, Technically there is no strong resistance before around 160 which is the 1990 peak.
Monthly RSI is stretched currently above 85, the highest reading ever and currently no divergence supporting the view of higher levels in USDJPY.
USDJPY is close to the 1.618 Fibonacci projection of the very volatile 22nd September at 149.34.
1.764 projection is at 150.15.
Short-term on daily time period there is divergence on RSI – at the time of writing – but it is very close to be traded out i.e. price and RSI being pushed higher. If RSI closes the day above 78.79 the divergence has been cancelled indicating even higher USDJPY.
For USDJP to reverse the short-term uptrend a close below 143.50 is needed.
EURJPY has been in a broad uptrend since Q2 2022 with high volatility. With the close above 145.63 yesterday EURJPY further confirmed the uptrend. RSI above 60 supporting the bullish outlook.
On weekly chart RSI has broken above its falling trendline indicating that despite there is divergence further upside is likely. If RSI closes above the horizontal dashed line the divergence is cancelled.
To reverse the trend medium term, a close below 137.50 is needed.
Longer term EURJPY has been in an uptrend since 2020 and is closing in on 2014 peak and strong resistance at around 114.80. A spike above 150 should not come as a surprise.
If EURJPY closes above 150 there is no strong resistance until around 170. However, if that scenario plays out (that EURJPY closes above 150) the uptrend will be so stretched some big correction or even reversal should be expected.
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