A bearish signal has appeared for USD/JPY and a medium-term reversal may be close, says Sejul Gokal, Chief Technical Strategist at GO-TechniKAL Insight.
Gokal says USD/JPY has produced a textbook bearish engulfing pattern on the weekly chart, which looks even more ominous when set against the major long-term resistances at the 100 and 200-day moving averages and the weekly Ichimoku cloud near 109.74 (Chart 1). He thinks an intra-week move below 108.43 would raise the threat of a reversal and a Friday (13 December) finish below 108.43 would offer concrete validation to a medium-term turnaround in sentiment. Downside targets include 107.72, 107.10, 106.57-47, and 105.74-70.
Gokal stresses, however, that this may not be a USD bearish story and points out that AUD/JPY is similarly looking to resolve a bearish (wedge) structure that may result in a near 4 big figure downside target (Chart 2).