Yen Pairs Monthly Outlook - September 2011

Weekly Update - September 02 close

USD/JPY

The Dollar-Yen has been forming a pronounced falling wedge, ending near the bottom line last month. There is still some room to the downside but I would expect a bullish turn soon to break the upper line; there is a second descending channel line (a wider wedge, not drawn) which would coincide roughly with November 2009 lows, April 2001 highs or January 2009 lows (84.70 to 87.00 area, with preference at 85.50) and this would be the first zone I would be targeting for this pair, on the longer term.

Another tight consolidation week for the USD/JPY, staying inside the 76.50/77.00 range. We could be having longs building up for the rise, although some more descent in extension could be seen below round number 75.00.

We are still below the moving averages on the Daily charts, but last lows could be signaling a bottom (which also form a double bottom if paired with last March spike down). I would expect a retracement to the weekly middle band and SMA34 levels (79.60 / 80.80) which are also Fibonacci’s 38.2% and 50%, as a first target; August daily spike near round number 80.00 has to be taken out clearly for much further upside.

EUR/JPY

Also on a falling wedge though at a less steep angle, the Euro-Yen has remained above last year’s lows despite its strong bearish tone. The pair is evolving inside a wide range between 105.50 and 123.10, presently at its bottom. Although it is soon to tell, we could be forming a double bottom and “W” pattern, however I would favor on the long term, a break of the support and round number 105.00 to reach towards the 127% extension on previous swing low as a first target, and maybe even the 138.2% level below (staircase breaks).

The Euro-Yen keeps falling and last week was again bearish but didn’t reach the lows. The double bottom formed by January lows and March spike down seems a strong support but we could reach near psychological level 100.00 if the pair doesn’t recover its strength.

On the Daily charts, price appears to be targeting a break of the lows at 108.00 and further downside would situate the short-to-medium term target around 105.00 (between the 127% and 138.2 extensions on the last swing low).

GBP/JPY

The pattern shown on the Geppy’s monthly chart is a descending triangle, which would suggest further continuation to the downside if the lows at 118.80 are broken. The projection of the inverted flag pole can lead us as low as 60.00 (161.8% extension) on a very long term, but we might find some support around 107.00/106.80 (confluence of the descending trend line and the lower channel line going from September 2000 to January 2009 lows).

A break to the upside and bullish recovery would target the previous highs at 140.50/141.00 (23.6% Fibonacci correction), then August 2009 highs at 163.20/30 (near the 50% retracement). There is a strong resistance level to conquer first at 148.00 (September 2000 lows). The next level if this resistance is broken will be around the 61.8% retracement (178.70 – round number 180.00 area).

Still on a steady bearish move, weekly Geppy seems preparing to break March lows and could go further towards 118.80 / 117.00 in weekly extension. We first need to retest and break last month’s lows at around 123.30 for continuing towards the daily 127%, 138.2% and 161.2 extensions as successive targets (121.20, 120.40 and finally 118.60).