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Flash: USD/JPY posts bearish weekly outside reversal - BMO Capital Markets

FXstreet.com (Barcelona) - Stephen Gallo, European Head of Currency Strategy at BMO Capital Markets notes that USD/JPY is posting a bearish weekly outside reversal.

He adds that coupled with a weekly stochastic that is pinned in overbought territory and showing signs of turning lower and a MACD at or near 30 year highs, a technical case can be made for a more pronounced downside correction in the days/weeks ahead. He writes, “100.00 – the psychological level that failed to break on multiple attempts in April will be a clear swing point to the downside from here with a break targeting the bull channel bottom at 97.25.” In the event of a close below that channel, Gallo sees that focus would then shift to fib retracement targets of the entire 77.13-103.74 rally that come in at 93.58, 90.43, and 87.29.

Admittedly, he notes that being short USD/JPY has been a very difficult trade to be in since September but the current set up certainly suggests caution to those that are long and patience to those that want to be. He adds, “Those with nerves of steel and a decent risk tolerance not to mention a penchant for the contrarian should either go short at current levels with a stop above this week’s high or use fib retracement targets of this week’s fall between 101.94 and 102.63 as entry zone with similar stop above the week’s high.”

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