[ProfileOou]

USDJPY
• Suddenly is looking very precarious. The recent up move to the peak in April was similar in depth to that seen into the peak in August last year before it commenced a strong move lower into December. That move started with a head and shoulders like pattern completing on the break of 103.45.

• This time around the recent peak at 99.80 was less than 30 pips shy of a 76.4% pullback of the 101.45 to 95.63 fall making 95.63 very pivotal.

• In addition we are trying to break the neckline of a head and shoulders pattern at 96.45. A close below this 95.63-96.45 range would suggest the potential for losses below 90.00 again.

• If this move is likely to take place what could the drivers be?????

USDJPY and U.S.10 year yields minus Japan 10 year yields


• Yields remain an integral part of the USDJPY performance and a move lower in USDJPY of the magnitude mentioned above would seem to require quite a narrowing in this spread.

USDJPY and U.S.10 year yields


• The reality is that this chart suggests that either the yield relationship would likely break down or a much lower level in U.S. 10 year yields would be needed to support this move lower.(Probably even 2.5% or lower)

EURJPY


• The picture on EURJPY started to look very constructive recently as it broke through the 200 day moving average for the first time since August last year.

• However it faltered at the 76.4% pullback level, just missed a bearish key day reversal at the high and closed below the 200 dma yesterday.

• It is now also threatening a close below the pivotal 131 area today (Something it tried but failed to do on 6th May)

• Such a close would be concerning as it would suggest a danger of a deeper retracement.