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Japanese Yen Price Outlook: USD/JPY, AUD/JPY, CAD/JPY

Japanese Yen Price Outlook: USD/JPY, AUD/JPY, CAD/JPY

Rich Dvorak, Analyst

JAPANESE YEN FORECAST: USD/JPY PRICE ACTION PLUNGES LOWER AS AUD/JPY, CAD/JPY EXTEND RALLY

  • Japanese Yen has weakened broadly with the exception of its US Dollar peer
  • USD/JPY price action looks primed to continue facing downward pressure
  • AUD/JPY has advanced to fresh yearly highs and CAD/JPY could catch up
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JPY price action has largely traded on its back foot for the last few months. Weakness across the Japanese Yen has broadly stemmed from its posturing as a top safe-haven currency. Demand for safe-haven currencies like the Yen has dissipated with market sentiment and trader risk appetite flourishing. The Yen has strengthened considerably against its US Dollar peer, however, as spot USD/JPY edges toward its lowest monthly close since October 2016.

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USD/JPY PRICE CHART: DAILY TIME FRAME (26 JUN TO 30 DEC 2020)

USDJPY Price Chart Yen Technical Forecast

USD/JPY price action could continue to face selling pressure headed into the new year as US Dollar bears strongarm the major currency pair lower. The Dollar-Yen might look toward the 102.50-price level, which is underpinned by the March swing lows, as a potential area of technical support. The bottom Bollinger Band and month-to-date lows around the 103.00-handle seems to have provided a bit of buoyancy so far, but the negatively-sloped 20-day simple moving average looks to be a more dominant headwind. A bearish crossover on the MACD indicator also suggests that downward momentum is accelerating.

USD/JPY BULLISH
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of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily -19% -3% -13%
Weekly -11% 5% -5%
What does it mean for price action?
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AUD/JPY PRICE CHART: DAILY TIME FRAME (04 SEP TO 30 DEC 2020)

AUDJPY Price Chart Yen Technical Forecast

AUD/JPY price action has advanced steadily since the early November swing low. The Aussie-Yen trades over 600-pips higher since then and is on pace to close 2020 at a year-to-date high. Although the relative strength index suggests AUD/JPY has entered ‘overbought’ territory, the bullish trend appears firmly intact. If volatility continues to bleed lower and sentiment stays upbeat, spot AUD/JPY could extend toward the 80.500-price level underscored by the April 2019 swing high. On the other hand, a return of risk aversion, which would likely correspond with a pullback across major stock indices, the Japanese Yen could catch a safe-haven bid and steer AUD/JPY lower. This scenario could bring the 50-day simple moving average into focus as a potential area of technical support.

AUD/JPY BEARISH
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 0% -22% -15%
Weekly 0% -27% -18%
What does it mean for price action?
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CAD/JPY PRICE CHART: WEEKLY TIME FRAME (AUG 2018 30 DEC 2020)

CADJPY Price Chart Yen Technical Forecast

CAD/JPY price action has also gained ground largely owing to the theme of strength across commodity currencies and weakness across safe-havens. This ‘reflation trade’ looks likely to continue into the new year with stimulus and vaccine developments keeping markets optimistic. CAD/JPY has faced technical resistance around the 82.000-handle, but an ascending triangle pattern looks to have formed from a series of higher lows since March. As upward pressure builds, a breakout above this level could motivate bulls to propel CAD/JPY toward the 84.500-price level near 2019 and year-to-date highs. The direction of crude oil prices might serve as a potential bellwether as to where CAD/JPY heads next considering the strong positive correlation between the Canadian Dollar and crude oil.

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-- Written by Rich Dvorak, Analyst for DailyFX.com

Connect with @RichDvorakFX on Twitter for real-time market insight

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

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