Yen continues to weaken as USDJPY runs through 118.00

16 December, 2016

The Japanese yen continued to weaken against a stronger U.S. dollar as USDJPY breached 118.00 level, last seen during February this year. Yesterday's economic data included U.S. consumer price index which rose 1.7% on a year over year basis, validating the general view that inflation is likely to inch closer to the Fed's 2% target rate. U.S. equity markets which closed in the Red after the Fed's announcement on Wednesday managed to pull back closing modestly higher by Thursday's close. Gold prices fell to a 10-month low yesterday at 1122.81.

USDJPY Intra-day Analysis

USDJPY (118.24): USDJPY continues to break new ground as price closed above 118.00 handle yesterday. The price zone between 118.00 - 116.00 remains a key resistance level from the weekly time frame where we also see a hidden bearish divergence. A reversal near this price zone could signal a long coming correction that could push USDJPY down towards 108.00 where support is likely to be established after price broke out strongly from this previous resistance level. On the 4-hour chart, initial support is seen at 114.80 which could break down giving way for a deeper correction to 109.75 - 109.00 and eventually towards 108.00.

GBPUSD Intra-day Analysis

GBPUSD (1.2419): GBPUSD fell to the support level of 1.2400 yesterday, breaking below the 1.2500 handle. A rebound off this level could potentially signal a near-term retracement to the upside with the support at 1.2571 that was breached likely to be tested for resistance. Further declines could, however, be seen coming on a break below 1.2400 handle. In this case, GBPUSD could be seen extending the declines to 1.2250. However, with the 4-hour Stochastics in the oversold level, and price seeking support at this level the bias is towards 1.2571.

AUDUSD Daily Analysis

AUDUSD (0.7358): The Australian dollar has been falling sharply for the past two days after prices consolidated into a bearish flag pattern. However, the daily time frame's Stochastics could see a possible bullish divergence which could be validated if the Australian dollar closes back above 0.7500 resistance level. Failure to retrace above 0.7500 could, however, keep the bearish bias intact which will see price extend the declines down to 0.7225 marking the first target of the bearish flag pattern followed by a decline to the lower main support at 0.7183.

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