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Chart of the Day: USDJPY

Flip to the USDJPY weekly chart, where last week we saw a bearish outside period with a lower low ensuing this week. On the daily chart, we can clearly see how the pair broke out of the multi-month trading range of 109.00 to 106.78 on 2 Aug. Despite a retest of the range, we’ve seen the sellers kick in, confirming the former range low as resistance.

Chart of the Day - Aug 9, 2019 - USDJPY, daily

It suggests to me that USDJPY could be establishing a lower new trading range or even a renewed bearish trend. And while we can see some support in 105.50, we’ve seen three lower highs in price. This implies that the buyers have limited firepower, and are struggling to state their case.

We see price holding the five-day EMA, which is headed lower, suggesting the higher probability is the pair trades lower. Fundamentally, the fact that US President Donald Trump continues to talk down the USD is one aspect. But we’re also seeing US “real” (i.e., inflation-adjusted) Treasury yields perilously close to turning negative. While this issue won’t necessarily harm the USD on a broad basis, it’ll weigh on USDJPY, which has a far higher correlation with US bond yields.

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