USD/JPY and DXY Monthly Forecast
DXY began its 2008 journey at the break of 78, rose 2700 pips to 105 highs and corrected 1200 pips to current 93.02. USD/JPY rose a stunning 5000 pips from 75 lows to 125 highs and corrected 1900 pips to current 106.28. The added 2000 pips to USD/JPY from 105 lows to later 125 highs was explained by the ECB September 2014 when Eonia went negative. The correct pair as a forecast was the DXY as currency pairs generally in any one period are allowed about 2500 pips in one direction. What this means for USD/JPY and DXY from the 1200 and 1900 pip corrections is the many solid supports established just beneath current prices.
USD/JPY. Not only does vital 104.00, 103.92, 103.86 and 103.37 rest just below current 106.28 but many supports are located at 105’s beginning with 105.82, 105.43, 105.41, 105.15, 105.07 and 105.02. What supports mean for current 105 bottoms are DXY important correspondent supports lie just below at 92.67 and 88.80. Currently, USD/JPY trades above DXY on every monthly average time frame from 2- 10 years. For the month, 105’s will serve as a tough break in USD/JPY because 105’s are also range breaks and places USD/JPY out of range vs DXY. Look for longs USD/JPY.
USD/JPY big breaks above for the month are first located at 106.30, 106.78, 107.10, 108.48, 108.92, 109.34 and 109.54. Further along the curve and not expected to break this month are rough resistance levels beginning at 110.18, 110.37, 110.41 and 110.74.
Why not expected 110 breaks is due to the maximum pip ranges in EUR/USD V DXY at 418 pips. The same 400 pips are seen in DXY V USD/JPY. Yet DXY 96.98 lies just above current DXY 93.02 and the DXY top V USD/JPY is seen at 95.75 which perfectly corresponds to EUR/USD V DXY.
To add further to 96.98, the maximum on the 96 break is seen at DXY 97.00’s which means 96.98 is not only a tough break but it may not hold if seen. Current USD/JPY is not only oversold but its rests on the 105 lines. The point to watch this month is not only 106.30 and 106.78 but EUR/USD at 1.1488.
Brian Twomey, Inside the Currency Market, btwomey.com