- USD/JPY is becalmed
- Its sharp, mid-May falls have yet to become anything more serious
- However, they may if the bulls cannot rouse themselves soon
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The US Dollar suffered two quite-sharp falls against the Japanese Yen on May 16 and 17. But the bears have so far failed to make them into anything more portentous.
The trading range of the fourteen days since may have tediously narrow but someone is clearly trying to build a base around current levels. So far, they are succeeding.
Will they continue to?
Well, USD/JPY is quite close to the middle of its year’s range. That essentially takes in the 115.09 highs made in January and March and the 108.20 low struck on April 17. I am not focusing on the year’s actual high. That was the intraday peak of 118.55. It was made very early, on January 4. It now looks simply to have been another step away from December’s top and therefore of quite limited use when we look at actual trade this year. The 115 area is much more representative.
So, USD/JPY is becalmed, and close to the middle of its range. This suggests that, when the action gets going again, the status quo ante will be restored. Sadly, for the bulls and their doughty defense, this probably means a downtrend resumption.
For the mature, gradual downtrend from January 3 remains in place and likely to endure unless the bulls can mount a serious challenge. So far there’s no sign of that, as you can see from the chart below.
The British Pound meanwhile has been meandering perhaps more conclusively lower against the Yen in recent sessions. That said it remains notably above support at mid-April’s low of 135.92 from which it subsequently put in quite an impressive climb.
It’s hard write about the Pound without mentioning the crucial UK election looming next week. Its arguable that much of the UK currency’s relative resilience stems from investor belief that the incumbent Conservative Party will still win the vote, despite the sharp narrowing of some opinion polls in favor of the challenging Labour Party.
If that prognosis proves correct, then expect a relief rally. If it’s wrong, then that support line is likely to give way very quickly.
--- Written by David Cottle, DailyFX Research
Contact and follow David on Twitter:@DavidCottleFX