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USDJPY Enters Ichimoku Cloud For the First Time in Four Months


Oct.04.2016

USDJPY Enters Ichimoku Cloud

On Tuesday USDJPY enters Ichimoku cloud for the first time since end of May 2016. This could turn into exciting news my divas! Let's do a classic IDDA approach to this naughty pair and see if there is any pip-grabbing opportunies coming up.

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P.S. After effects of Vice Presidential debate in the US could create more volatility too.

USDJPY Enters Ichimoku Cloud - Kiana Danial with Capital Index USDJPY Enters Ichimoku Cloud - Kiana Danial with Capital Index

Technical Analysis - USDJPY Enters Ichimoku Cloud

The USD/JPY pair entered the Ichimoku cloud on the daily chart on Tuesday for the first time in 4 months, led by a strong USD bullish sentiment. While the cloud is incredibly thin, a break above it could be the first reversal signal for the pair in over 10 months. (Damn!)

But before you get high on adrenaline, we obviously need a break ABOVE the Ichimku cloud. The difficulty of this is doubled because the pair is also batteling to break out of a Triangle chart pattern as well. The lower band of the triagle lies on the strongest support  for the pair over the years, which is also a long-term 50% Fibonacci retracement level, and a pivot level ; I'm talking about the 100 level.

USDJPY Enters Ichimoku Cloud - Technical Analysis Daily Chart USDJPY Enters Ichimoku Cloud - Technical Analysis Daily Chart

If the Ichimoku cloud resists the break, the pair is likely to go back to its range trading habitant for yet another cycle. Cue, the cloud is flat.

 

Economic Calendar

Wednesday:

On the economic calendar Wednesday during the London session UK Services PMI will be out at 8:30 AM GMT.

During the New York session the ADP Non-Farm Employment Change will be out of the US at 12:15 PM GMT, followed by  ISM Non-Manufacturing Composite (SEP) at 2 PM  which could create further volatility in the USD/JPY pair.

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Thursday:

During the New York session on Thursday Challenger Job Cuts at 11:30 AM out of the US could create a little bit of volatility.

However the real volatility could be later at 12:30 PM when the US releases their Unemployment Claims.

 

US Economy

Looking at the fundamental point of the Invest Diva's Diamond Analysis, we certainly need to look at the US economy before getting into USD JPY testing Ichimoku technical analysis.

GDP: Second quarter Gross Domestic Product kicked butts end of September, coming in at 1.4% versus the 1.3% expected and higher than the 1.1% of last reading. This certainly ignited a fire in the pants of USD bulls.

PMI:  Another good news for Ms. USA came out first trading day of October, as the ISM manufacturing PMI reading for September indicated a return to industry expansion. The reading rose from 49.4 to 51.5, outpacing the consensus at 50.4.

Components of the report indicated that the employment sub-index was up from 48.3 to 49.7 during the month, reflecting a slower pace of contraction. Stronger gains were seen in new orders and production while the component for prices was unchanged at 53.0 instead of rising to the 53.5 consensus, suggesting subdued inflationary pressures.

So what? With this, if the US economic data continue to beat expectations, an FOMC rate hike end of the year will become more likely.

Guess what that will do to the USD/JPY?

 

Trading Strategy - USDJPY Enters Ichimoku Cloud

With growth in US economic data, the USD/JPY pair is heading back inside the good-old Ichimoku cloud to see if it can break above it this time around. The pair last tested and even entered the Ichimoku cloud back in May, however it was not able to breakthrough.

Since the pair is also facing a triangle pivot at the moment, we are not getting our hopes up... However it is important to be on a watch-out to develop our next bullish strategy.

Bullish Scneario: Wait for a confirmation. Our resistance is set at 103.50 and 105.25.

Bearish Scenario: If the pair is not able to break above th Ichimoku cloud and if unemployment out of the US is disappointing, the pair could head back to support of 100.

Only a break below 100 could break the current range and open doors to new 2016 lows.

 

Here are Invest Diva's calculations for important USD/USD  approximate levels to keep an eye on from a long-term perspective:

Support Levels Turning Point Resistance Levels
97.50 100 105.25
100 103.50 108.70

 

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 xoxo

Kiana 喜愛成
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