Yen Pairs Monthly Overview - April 2011

Weekly updates: April 08/11 close.

USDJPY

The Dollar-Yen fell through previous month lows in March as expected, reaching the lower trend line of the descending channel and lower Bollinger band, near our 76.40 target, being then strongly rejected, rising back and closing near the former highs, at around 83.50. After a retracement near the 50% Fibonacci earlier this month, price has come back to the bearish side and a retest of support in the 83.20/50 area would be expected. If this support holds, we would be aiming towards the upper line of the channel at around 88.00/20. Should it break, target to next support at around 80.50 as first step, then to the previous lows around 76.50.

Last week price reached the upper weekly Bollinger band and closed below the round number 85.00. Earlier this week, price has made a correction to the 23.6% Fibonacci level and support at 83.30, retesting the break of the daily SMA200, holding and bouncing back toward the highs. I would expect a retest of the round number on the upside and last highs at 85.50, with a continuation in extension to 87.00/40 which is the 138% level. Should price fail to break above 85.00/50, we would be targeting again today’s lows at 83.50 in a first step, then 83.00/82.60 where there is a confluence of the daily SMA100 and SMA34, however we would have to break the 83.30 and middle line of the Bollinger bands support.

EURJPY

March broke February’s range to the upside, crossing the upper line of the falling wedge and closing near the middle line of the Bollinger bands, reaching our last month’s forecasted levels. As expected, price has continued its bullish run in the first week of April, with a new high at 123.30. We are still expecting further upside towards round number 125.00 on a medium term and longer term 128.00 which are the previous highs, aiming to a 61.8% Fibonacci retracement at 125.80/126.00.

The Euro-Yen reached the weekly SMA100 and 127% extension on the previous swing high, ending last week with a 240-pip consolidation between 120.70 and 123.10. Further upside is expected, however after making a new high on Monday at 123.30 we have seen a 38.2% retracement and price is presently turning back to the upside but with some resistance at 122.00. On the 4-hour charts, the SMA34 is holding and price will probably be forming a range between this and the middle line of the Bollinger bands (121.66/122.00) but if price stays above these levels we would be aiming again at Monday’s highs and further.

GBPJPY

The Geppy closed march just below the middle line of the Bollinger bands, forming a long-legged bullish doji after the break of previous lows occurred after the Japan’s tsunami events. Recovery due to BOJ intervention was strong as well and price ended at almost the same level as February close. I would maintain my views to the upside towards the levels that I indicated in last month’s overview: “Target levels in this direction would be a test and break of 135.60, then 138.00/50 (61.8% retracement/top of the triangle) and finally a retest of the highs at 145.70. A bearish break would lead in extension to around 120.00/118.00 (January 2009 lows and 127%, getting near 138.2% level)”. The first two events have already happened in the first week of this month, and we are presently climbing back up after a 38.2% Fibonacci downside retracement over the whole move higher from the lows. A break of 140.00 Friday’s resistance and weekly highs would lead us to the SMA34 and previous April 2010 highs, at 145.70/146.00.

The Geppy performed a 127% extension on the previous swing high, reaching near the weekly SMA100 and with a similar type of consolidation pattern over the last three days of the week as EURJPY’s. We have a strong resistance area here, former support levels in September and November 2009, January and April 2010, and of course the SMA100.

As said above, we are into a bearish correction which could extend to an area which goes from 135.00/134.40 (daily middle line of the Bollinger bands and 4-hour charts SMA100) to the 38.2% level and 4-hour chart SMA200 at around 133.30. I do not think it will fall much further than that, and thereafter will come back to the bullish side aiming to above-mentioned 145.00/146.00 levels.