Japanese Yen Forecast: USD/JPY, CAD/JPY, AUD/JPY

Japanese Yen Price Outlook:

• USD/JPY suffered a disastrous two-day decline to start the week as the Yen looks to reassert itself
• CAD/JPY broke above a descending trendline, but follow-through has been lackluster
• AUD/JPY may be the most intriguing of the Japanese Yen crosses as it ponders a major break

Japanese Yen Forecast: USD/JPY, CAD/JPY, AUD/JPY Levels to Watch

The Japanese Yen has been subject to notable volatility in recent weeks, despite a modest drawdown in price action in markets like the Nasdaq 100 which traditionally see larger swings. Consequently, various Yen crosses have approached major technical levels which has put longer-term trends at risk, but few actual breaks have been made and ranges remain largely intact. If volatility does emerge, however, it may not take much to spark serious price swings. Here are the possible breaking points to keep in mind in the event of an uptick in market volatility.

USD/JPY Forecast

USD/JPY is a prime example of a Yen cross experiencing large intraday price swings while establishing little directional progress. After a recent break above resistance around the 106.70 mark, it appeared as though further bullishness could see the 200-day moving average overhead come under fire. Evidently, follow-through was lacking and the pair quickly reversed lower to keep the broader USD/JPY downtrend intact.

USD/JPY Price Chart: Daily Time Frame (August 2019 – August 2020)

Thus, there is little evidence to suggest a sudden break out of the slow bleed as the series of lower-lows and lower-highs looks poised to continue. A potential risk to the trend is the looming FOMC meeting minutes, but a significant move would likely have to pierce support around the late-July low or the recent peak near 107 to materially change the current formation. Therefore, USD/JPY seems destined to continue its slow churn lower until a concrete change is made in the underlying fundamentals – in my opinion.

CAD/JPY Forecast

While the Canadian Dollar has staged a run against other major currencies, CAD/JPY remains somewhat more contained. A recent breach above a descending trendline and subsequent Fibonacci resistance around 80.57 was encouraging, but a quick pullback eased hopes of a follow-through.

CAD/JPY Price Chart: 4 – Hour Time Frame (February 2020 – August 2020)

Nevertheless, price action in the wake of the covid crash would suggest a gradual continuation higher for the pair which could accelerate if the June high is surpassed. In the meantime, price action looks susceptible to periods of indecision and consolidation which has seen the pair slip into a trading range between 82 and 78. This band could allow for attractive range trading opportunities, particularly given the lack of volatility as of late.

AUD/JPY Forecast

AUD/JPY is perhaps the most intriguing pair of those in focus as it approaches an intersection of support and resistance that has influenced the pair at various stages since early June. To the topside is a band of potential resistance with an upper bound at 76.84 while support looks to exist along the ascending channel near 76.

AUD/JPY Price Chart: 4 – Hour Time Frame (June 2020 – August 2020)

Clearly, the pair has worked itself into a corner and could be susceptible to a break out, making it an attractive opportunity for break out trading strategies. Since the longer-term trend has created a series of higher lows, I do favor a bullish break at this stage, but resistance has certainly proven its merit.

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Further still, current market conditions may reduce the follow-through potential of an eventual break. Either way, USD/JPY and CAD/JPY seem comfortable in their current trends while AUD/JPY is knocking on the door of a potential break, creating a variety of options depending upon your preferred trading style.

--Written by Peter Hanks, Strategist for DailyFX.com

Contact and follow Peter on Twitter @PeterHanksFX