Contrary to all the efforts of the BOJ, the yen is on a roll in a clear “risk off†environment. The team at SocGen examines the charts and sees interesting patterns:
Here is their view, courtesy of eFXnews:
USD/JPY achieved last year the tipping point of 126.00 at the end of the sustained up trend from 2012 lows, and in the process, the pair traced a massive ABC formation since 1995 lows (Elliot Waves principles) with up-moves each lasting three years, developing within a steep bullish channel and falling through at the long-term up channel resistance, notes SocGen.
“Historically, JPY has a tendency to reverse in a V-shaped formation which is this time completed by a Head and Shoulders pattern. Monthly indicator Stochastic has rejected the 20-year resistance (red horizontal line) then has given a negative crossover hence prompted a compelling long-term bearish signal,†SocGen argues.
Near term, SocGen notes that USD/JPY has just made a break below the critical level of 116.00/115.50 which consists of the confirmation level of the broad Head and Shoulder pattern, which should act as a catalyst especially after being confirmed with the daily close below this zone.
“The projected target for the pattern is located at 106, also the 38.2% retracement of the 2012-2015.
Immediate support stands at 113.80/113.20, the 23.6% retracement and the lower boundary of the down sloping channel within which the pair has been evolving over the past months,†SocGen projects.
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