How Far Can The USDJPY (And S&P) Drop: Goldman's Top Chartist Explains

With today's capitulation puke in the USDJPY sending the pair tumbling below the key 110 psychological level, the lowest level since November as longs finally threw in the towel, traders are wondering how far can it drop. And since fundamentals have not changed, we seek the answer among the technicals, in this case Goldman's chartist who this afternoon writes that what has happened in the USDJPY today is a characteristic continuation patterns.

Some more details from Sheba Jafari:

The break below 110.14 opens up some downside momentum. The first pivot area to watch here is 109.65-109.38; includes 50% retrace from the Sep. ’16 low as well as a minor equality target off the Mar. 30th high. The bigger level below is down at 108.45; an equality target off the high. Getting to 108.45 might complete a corrective process that began in December and should therefore be an area to watch for signs of a more meaningful base. Worth keeping an eye on prior triangle support, now resistance at 110.14. Getting above there increases the risk of a near-term squeeze

Goldman's View: Next in focus 109.65-109.38. Looking to 108.45 for signs of a base. Squeeze risk above 110.14 (prior triangle support).

Daily Chart

Intraday Chart


And since the USDJPY is the biggest signal for the S&P itself, here is Goldman on what to expect from the S&P cash:

Currently ticking through the 55-dma 2,343. This has been a reliable pivot in the past, having held the more recent pivot low in March. It’s an important one to watch into the daily close. The next level below there is 2,326-2,322; includes the Mar. 27th low and 23.6% retrace. Getting through this area should increase the chances of seeing one final dip into wave C of an ABC off the high that targets ~2,300. Reaching ~2,300 would however complete a corrective setup and be an interesting place to consider watching for signs of a more meaningful base. Need above 2,393 (minor abc from Mar. 27th low) to invalidate this setup, and call into question the potential to have already turned.

Goldman's View: Next two levels to watch are 2,343 and then 2,326-2,322. Consider bullish exposure either near to 2,300 or above 2,393.