No change since last month: This is a chart that we have focused on time and time again. A 4th wave triangle (that took 12 years) is complete at 124.13 as a 4th wave and the USDJPY is headed lower in a 5th wave (and terminal thrust) that will end below 81.12. The underside of the lower line of the triangle was tested as resistance at 110.65 last month. This could be the top of corrective wave 2 from 95.72.
Japanese Yen interest rate expectations have remained relatively unchanged through the past several months of trading, and clear deterioration in US Federal Reserve rate forecasts means that markets predict that the USD-JPY yield differential will shrink by 4 basis points in the year ahead. Yet the Japanese Yen is far more likely to move on developments in global risky asset classes; if we see global equity markets continue to decline, the Japanese Yen will likely continue strengthening against the US Dollar.
Forex Futures data Shows USDJPY May Rally Further Before Noteworthy Declines
Written by Jamie Saettele, Senior Strategist and David Rodríguez, Quantitative Analyst for DailyFX.com
To contact the authors of this report, please e-mail research@dailyfx.com.