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Japanese Yen Time Cycle: Implications for AUD/JPY and EUR/JPY Rates

Japanese Yen Time Cycle: Implications for AUD/JPY and EUR/JPY Rates

2020-07-30 01:00:00
Daniel Moss, Analyst
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AUD/JPY, EUR/JPY, Japanese Yen Technical Analysis, JPY Cycle Analysis – Talking Points:

  • Cycle analysis suggests the Japanese Yen may extend losses against its major counterparts.
  • AUD/JPY eyeing a push to test the 50-month moving average.
  • EUR/JPY could continue its surge as the RSI crosses into bullish territory.

With the end of July fast approaching long-term investors will be intently watching how the Japanese Yen closes out the month, as cycle analysis suggests the haven-associated currency could substantially underperform its major counterparts over the next 6-9 months.

Japanese Yen Index** Monthly Chart – Cycle Analysis Points to Further Downside

Japanese Yen Time Cycle: Implications for AUD/JPY and EUR/JPY Rates

JPY Index monthly chart created using TradingView

**JPY Index averages USD/JPY, GBP/JPY, EUR/JPY, AUD/JPY

The chart above highlights the cyclical nature in the Japanese Yen over the past 26 years, with the currency largely adhering to what appears to be an 8-year rotation. Significant bottoms in the JPY index were set in late 1998, early 2007 and late 2015.

After bottoming out against its major counterparts, JPY then seems to outperform early in the cycle with key highs set just shy of two years after the 1998 and 2007 lows.

Although the Japanese Yen soared to its current cyclical high only 13 months after the start of the period, it looks to have mirrored the price action seen in the second-half of the 1990-98 and 2007-2015 cycles. Soaring to set a secondary high just under 6 years after the low set in 2015.

To that end, the haven-associated currency could be poised to drastically extend its recent declines against its major counterparts, with cycle analysis suggesting JPY could fall as much as 30% from current levels before bottoming out in 2024.

Of course, this is not a given when taking fundamentals into account. Nevertheless, investors should continue to monitor long-term developments as the AUD/JPY and EUR/JPY exchange rates eye a push to yearly highs.

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AUD/JPY Monthly Chart – Struggling at December High, MACD Hints at Further Gains

Japanese Yen Time Cycle: Implications for AUD/JPY and EUR/JPY Rates

AUD/JPY monthly chart created using TradingView

The AUD/JPY exchange rate is eyeing a push to test the trend-defining 50-month moving average (78.85) and downtrend resistance extending from the 2014 high (102.84).

Although the RSI is struggling to climb above its neutral midpoint and remains capped by 12-year trend resistance, the MACD indicator suggests further upside may be on the cards.

With the MACD histogram jumping above 0 for the first time since early 2018, and the ‘faster’ signal line crossing above the ‘slower’ MACD line, a break above the 6-year downtrend could be on the cards in the coming months.

However, a monthly close above the December 2019 high (76.54) is needed to validate bullish potential and possibly carve a path for price to climb back towards the sentiment-defining 200-MA (81.83).

AUD/JPY BEARISH
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily -4% -14% -8%
Weekly 36% -21% 4%
What does it mean for price action?
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EUR/JPY Monthly Chart – RSI and MACD Hint at Extension of Recent Rally

Japanese Yen Time Cycle: Implications for AUD/JPY and EUR/JPY Rates

EUR/JPY monthly chart created using TradingView

Bullish divergence seen on the RSI, as the oscillator fails to follow price to lower lows, suggests that the EUR/JPY exchange rate could extend its recent rally and climb to test key resistance at the 200-MA (126.35) and 38.2% Fibonacci (123.09).

Furthermore, the MACD indicator supports the bullish bias displayed by its technical counterpart, as the histogram climbs back into positive territory and the MACD crosses above the signal line.

However, the 50-MA (124.30) seems to be stifling buying potential for the time being, as it has successfully done since January 2019.

With that in mind, a monthly close above the psychologically pivotal 125 level may be needed to validate bullish potential and carve a path for price to climb back above the 200-MA (126.35) for the first time in two years.

EUR/JPY MIXED
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 11% -25% -13%
Weekly -36% -9% -23%
What does it mean for price action?
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-- Written by Daniel Moss, Analyst for DailyFX

Follow me on Twitter @DanielGMoss

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