[September 2 Analysis Report] USD/JPY 160 resistance band breakout!?
A stronger dollar scenario continues.
Next focus: USD/JPY at 160
EUR/USD mid-term analysis ｜ After the expected decline, conditions for selling intensify from here.
Hello, this is Leo.
In the analysis at the start of last week, we anticipated a trend where the dollar would rise and dollar crosses including EUR/USD would tend to fall.
So far, largely as expected.
However, this is not yet a scene where we can say the “full-scale decline has begun.” The 1-hour chart for EUR/USD still maintains a bullish Dow, and there is a reasonable chance the scenario could break down from here.
Right now, more important than whether the forecast was right is to clearly determine where a breakout would increase the probability of continued decline, and conversely where to adjust our view.
Higher timeframes are selling, 1-hour chart still buying
From the Dow perspective, the daily chart is selling, the 4-hour chart is selling, and the 1-hour chart is buying. This structure has not changed since last time.
Even if prices are falling, unless the pullback low on the 1-hour chart is clearly broken, the buying Dow on the 1-hour chart cannot be considered broken.
Therefore, at present, a return-sell on the daily and 4-hour timeframes may be starting, but we are not yet at a stage where selling against the 1-hour buying Dow is warranted.
However, the timeframes are not yet aligned.
From the previous look1.15658continues to be a factor for retreating the 1-hour chart buy. If this level is clearly broken below, the daily, 4-hour, and 1-hour charts are more likely to align toward a selling direction.
Next focus: the 160 yen defense for the dollar/yen
There is a strong resistance band around 160 yen for USD/JPY.
If the price can break above around 160 yen decisively and then hold in the high range, there is potential for further dollar buying. If dollar strength accompanies a broad rise, EUR/USD will have a downward tailwind.
On the other hand, if it temporarily breaks above 160 yen but is quickly pushed back down, caution is required. 160 yen is a level that market participants mind strongly, increasing alertness to yen weakness and possible intervention.
What we want to confirm is not only the fact of breaking 160, but also whether USD/JPY can hold in the high range afterward, and whether EUR/USD can itself make a new low.
There are factors supporting dollar strength and reversal risk
As of writing, the dollar is trading near its recent high in the context of rising U.S. interest rates and demand for a safe asset. So far this aligns with the recently anticipated dollar strength and dollar-cross declines.
However, as USD/JPY approaches 160 yen, warnings about yen weakness and potential FX intervention tend to intensify. If Bank of Japan rate hikes become more probable, USD/JPY could plunge rapidly.
Therefore, when using dollar strength as a tailwind for EUR/USD selling, we will also clearly distinguish whether the move is a case of “yen alone is weakly rising” or “dollar-wide strong rise.”
Important indicators from September 2 onward
From here, indicators leading to the U.S. employment report will continue. Because this overlaps with the 160-yen defense by USD/JPY, be cautious of moves before and after the releases.
If strong indicators push U.S. rates and the dollar higher, there is a possibility that USD/JPY breaks 160 and EUR/USD declines simultaneously.
Conversely, if indicators are weak or strong results do not push the dollar higher, caution is advised. If the market cannot react to the data, dollar buying may have run its course.
Immediately after releases, spreads widen and rapid reversals are common, so instead of chasing the initial move, confirm the direction of the dollar after the release before deciding. Release times can change, so please check the latest economic calendar before trading.
Two scenarios considered from here
Sell EUR/USD as the dollar continues to strengthen
If USD/JPY decisively breaks above 160 and remains in the high range, and EUR/USD breaks the 1-hour rising low and cannot update to a new high on retrace, we target selling on rallies.
Ideal is a moment where USD/JPY rises, overall dollar strength is confirmed, and EUR/USD itself turns downward.
USD/JPY stalls at 160 and selling is deferred
If USD/JPY stalls at 160 and EUR/USD does not break the 1-hour low and instead makes a higher high, we do not rush to sell.
In particular, if weak U.S. indicators or intervention warnings trigger broad dollar selling, we may reset the scenario and look to reestablish higher-timeframe rally opportunities.
Our view remains; however, the verdict is not yet in
The daily and 4-hour charts are selling, the 1-hour chart is buying. This Dow direction has not changed since last time.
The dollar-strength/dollar-cross decline trend we anticipated continues to be in line with expectations so far. However, since the 1-hour chart’s buy has not yet broken, we cannot conclude that a full decline has begun.
The next focus is USD/JPY at 160. If we clearly break above 160 and dollar-wide strength continues, EUR/USD declines are more likely to be reinforced.
On the other hand, if it stalls at 160 or if dollar strength falters after U.S. data, we will consider adjusting the scenario. We will aim for opportunities where USD/JPY and EUR/USD move in sync without clinging to our forecast.
ADP National Employment Report／U.S. Census Bureau／Federal Reserve／U.S. Bureau of Labor Statistics
9 years of FX experience. Based on the skills developed as a full-time trader, I develop L signals and automated trading. I continue to create products while publicly sharing validation results and risks, asking, “Would I want to use this myself?” as the standard.
“Leo FX college”
You can receive information useful for daily learning, including questions and consultations about trading, learning materials, and latest notices, for free.