FBS: "wedges" on JPY crosses
JPY crosses are quite sensitive to the changes in the risk sentiment with JPY strengthening at the times of risk aversion as Nikkei 225 tends to fall. Today we see that Japanese stock index returned to growth after the initial losses pushing EUR/JPY, GBP/JPY and AUD/JPY higher. However, the Nikkei index is now close to testing the 7-month rising uptrend support line. If it breaks below this line, JPY crosses will find themselves under severe pressure.
The EUR/JPY pair remains supported by the 50-day MA and the thin bullish Ichimoku, but has a big reversal potential. The pair is testing the bottom of the reversal “rising wedge” pattern (currently at 133.20). Pay attention to the MACD divergence on a weekly chart - another bearish signal.
JP Morgan strategists are ready to sell EUR/JPY on a break below 132.15 with an initial target of 124.97/95. Commerzbank will go short on the pair on a weekly close below 132.00 with a target of target at 122.80. Strategists at HSBC have already sold EUR/JPY at 133.20, with a target of 128.00 and a stop at 135.80 (more details here).
Chart. Daily EUR/JPY
GBP/JPY has also formed a “rising wedge” pattern, but is now trading around 400 pips above the bottom line. According to JP Morgan, bulls сould have taken the pair over full control below the key support at 154.10. Next targets are seen at 151.10 and 147.60.
Chart. Daily GBP/JPY
On the AUD/JPY chart we also see a "rising wedge", though it is a little bit smaller because of a sharp Aussie drop in spring. Slide below 92.50 would open the way to 90.70 and then to 86.50.
Chart. Daily AUD/JPY