US Dollar, Japanese Yen, USD/JPY - Talking Points
- US-China trade deal uncertainty may boost Japanese Yen
- USD/JPY may top after break under bearish chart pattern
- Majors-based Yen index has room to climb to trend line
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Japanese Yen Fundamentals
The anti-risk Japanese Yen spent most of its time this week making progress against the US Dollar. On the whole, its drive has been fueled by uncertainties regarding hopes of a US-China trade deal. As a result, the MSCI Emerging Markets Index has shed about 3.3 percent of its value since topping earlier this month. This is as the Greenback stalled with bond yields on testimony from Fed Chair Jerome Powell.
Mr Powell reiterated that where they are with monetary policy “is appropriate” despite what appears to be a “favorable” outlook. With that in mind, the primary focus for the Yen from here will likely remain on trade wars. Over the past 12 hours, we have seen White House Economic Advisor Larry Kudlow boost hopes of a trade deal. But, Donald Trump’s reluctance to commit to lowering Chinese tariffs could revive risk aversion.
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Japanese Yen Technical and Sentiment Outlook
On a daily chart, USD/JPY has closed under a Rising Wedge chart pattern in the aftermath of an Evening Star candlestick formation. These are bearish price signals that could imply a reversal of the dominant uptrend since August. Confirmation is key with technical analysis. If prices manage to find upside momentum, pushing back into the chart pattern could overturn it. Uptrend resumption would entail a daily close above 109.32.
I would like to see prices breach the November 1 low at 107.89 for further bearish confirmation. This might be the case given that trader positioning is favoring the upside. According to the IG Client Sentiment Report from November 14, traders are further net-long USD/JPY than yesterday and last week.The combination of current sentiment and recent changes gives us a stronger bearish contrarian trading bias.
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USD/JPY Daily Chart
USD/JPY Chart Created Using TradingView
Using a majors-based Japanese Yen index - an average of its performance against USD, EUR, GBP and AUD - prices are on the rise after finding a bottom at June and July lows. This followed positive RSI divergence, signaling fading downside momentum. At times, this can precede a turn higher. As such, there may be some room for Yen to climb as it approaches a potential descending trend line from the beginning of September.
Majors-Based Japanese Yen Index
Majors-Based Japanese Yen Index Created Using TradingView
FX Trading Resources
- See how the Japanese Yen is viewed by the trading community at the DailyFX Sentiment Page
- Having trouble with your strategy? Here’s the #1 mistake that traders make
- Just getting started? See our beginners’ guide for FX traders
--- Written by Daniel Dubrovsky, Currency Analyst for DailyFX.com
To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter
