Skip to Content
News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.



Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events


Economic Calendar

Economic Calendar Events

Free Trading Guides
Please try again
More View More
The Land of the Falling JPY Aligns With Big Test for US Economy: SW Report

The Land of the Falling JPY Aligns With Big Test for US Economy: SW Report

Tyler Yell, CMT, Currency Strategist
  • JPY drops past 114 per USD after victory helps validate view of gov’t supported JPY weakness
  • NZD remains weak on new government formation that has similar ideology of Japan
  • IGCS favors keeping an eye on further EUR strength against weaker FX (e.g., JPY, NZD, CAD)

A stubborn block of JPY strength was removed from the market on Sunday.

The broadly expected victory by Japanese Prime Minister Shinzo Abe in the snap election he called to extend the Liberal Democratic Parties control will ensure a same line of thinking in Japan that has helped the JPY find persistent selling after fears subside.

Over recent weeks, I have written pointedly about the concentration of time-specific options for JPY Calls (right, but not the obligation) to buy JPY (USD/JPY lower) if an unthinkable election outcome would result. A defeat for Japan over the weekend would have been similar to the immediate Brexit aftermath as a new government would have needed to have been put together and the work done by the BoJ to have a balance sheet of purchased assets more extensive than the US Federal Reserves would need to be addressed about unwinding as well. However, the election outcome favored the incumbents, and in so doing, the options to buy JPY and push USD/JPY lower were unwound while other themes like higher equity markets like the Japanese Nikkei and SPX500 alongside higher US Yields favor a rising USD/JPY.

The offers to sell NZD keep coming and on Monday the price of NZD weakening remained a dominant theme. The formation of the new government that has made statements on how the NZ economy ‘lives or dies by exports’ and that sees the RBNZ’s mandate as maybe needing to be changed favor full employment favor a weakening NZD to help boost exports and thereby employment in an export-dependent economy.

As the market learns more about this new Labour-NZF-Greens coalition government and PM Prime Minister-elect Jacinda Ardern, the bias will likely be to sell strength in NZD. The fear may be overdone, but it appears too early to tell, and the SW index is showing that momentum favors not standing in the way of NZD weakness

Lastly, keep an eye on the US 10-Year Treasury yield that is sitting at a level it has not been above since May, 2.40%. A move in the 10Y yield above 2.40% would indicate a selling of Treasuries in the middle of the curve that tends to be indicative of stronger US growth or inflation that could lead to a tightening Federal Reserve. A break higher in the yield would argue for further USD strength, which aligns with the current SW ranking.

Access our trading guides to help you develop your trading strategy

Strong/ Weak Index October 23, 2017

Chart created by Tyler Yell, CMT

Interested in DailyFX’s FREE longer-term price forecasts? Click here to access

IGCS Highlight: Euro weakness may persist as ST retail bullishness is on the rise

EURUSD: Retail trader data shows 42.0% of traders are net-long with the ratio of traders short to long at 1.38 to 1. The number of traders net-long is 19.0% higher than yesterday and 4.9% higher from last week, while the number of traders net-short is 3.7% higher than yesterday and 9.6% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EURUSD prices may continue to rise. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current EURUSD price trend may soon reverse lower despite the fact traders remain net-short(emphasis mine.)

For a deeper explanation on what’s been shared above, please join the FX Closing Bell Webinar with Tyler Yell


Written by Tyler Yell, CMT, Currency Analyst & Trading Instructor for

To receive Tyler's analysis directly via email, please SIGN UP HERE

Contact and discuss markets with Tyler on Twitter: @ForexYell

Access Our Free Market/ Trading Guides Here

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.