July this year is really a crazy one for me, lots been happening. My son's project, from his course as well as the competition, Noy to mention my daughter is finally started her journey through University.
Finally, life is settling down by the end of the month and what happened on arrival of August?
Nikkei was down 1,733 plus points in one day, while whole day fluctuation reached a range of 2,388, closing at 34,928.
While this was happening, JPY strengthened by 2.803, with fluctuated range of 3.361, closing at 146.5560.
I am not sure what happened as I was still trying to re-adjust back to my normal life. But my interest is only on the chart. So just look at the chart.
I did an entry on Nikkei "Is Nikkei firm on continuation downward?" on 1st of June 2024 and JPY in JPY is....ENGULFed!!! dated 4th of May 2024. I estimated a potential reversal then for both counters. They did not, at least not yet at the time. Both counters went on further continuation only to reversal after hitting the Bollinger envelop.
So what is happening now?
Fig 1. JPY weekly chart
JPY reached the 61.8% level of a major projection before it reversed, and the reversal was with momentum. Its descend even dropped below its 55-week moving average this week, closing below the level only supported by its Bollinger envelop.
I rarely use project such reversal as it went above the previous high. However, due to its gradual gradient upward after a steep drop, I believe his is applicable.
Using the projection measurement downward, it can be seen that JPY already dropped below its 161% level and 23.6% retracement line.
The next level of support will be its 89 weeks moving average at 145.601, beraking this point, the nextr level of support will be 139.811, which also coincide with its 38.1% retracement (138.645) and its 144 weeks moving average.
Having said that, it was a steep drop this week and I believe a correction or congestion in the coming weeks before continuation.
If I consider the recent formation a double top, it is possible to measure an objective, which is 143.141. This also mean a potential retracement back to its neckline at 151.859 before continuation.
Fig 2. Nikkei 225 weekly chart
When I look at Nikkei 225 chart, I can't help but to note that similarity between Nikkei and JPY at this point of time, except that Nikkei is weakening while JPY is strengthening.
The difference is that Nikkei crossed the 100% of its major and minor projections while failing to reach its 127% major projection resistance, it crossed the 127% minor projection before retreating.
Using projection measurement downward, similar to JPY read, it is noted JPY is presently supported by its 161% projection (34,973) which coincide with its Bollinger envelop (35,442), closing at 34,928 at the end of the week.
Similar to JPY, I expect a potential correction or congestion before continuation downward. Like JPY, I can also consider a double top formation with a minimum objective of 32,039 which with neckline of 36,688, the retracement may reach back to this neckline before continuation, this also coincide with its present 144-week moving average at 32,217.
This one thing I do not understand is why the continual divergence which JPY does not follows the behavior of Nikkei. In general, a rise in index would indicate a long for shares therefore an increase in demand for the currency, vice versa. With such a sharp fall on the index, I would consider an exit from the market leading to weakening of JPY, yet the demand of the currency increases. Unless someone is accumulating and expecting Nikkei to go higher.
Anyway, I believe this will be an issue of fundamental analysis.
Labels: JPY, N225, Nikkei
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