Talking Points

  • After a long period of dominance, the Yen is returning some of its gains
  • The US Dollar has been a clear beneficiary, with the downtrend from this year’s peaks broken
  • The New Zealand Dollar has done well too, but seems to be taking a breath

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The Japanese Yen looks to be in more trouble against the US Dollar than it has been for quite some time.

Ten of the last thirteen trading days have seen USD/JPY gain, snapping in the process its long downtrend from July 11’s peak. The pair’s steep climb since September 8 has seen it scale peaks not seen since mid-July.

The fundamental backdrop for this surge of vigor is not hard to pin down. Tensions over North Korea appear to have eased, global risk appetite has been revived and the chasm between tightening US monetary policy and Japan’s uber-looseness continues to yawn.

Japanese Yen Technical Analysis: Year's Lows Creep Back Into Focus

The question now of course is how far can USD/JPY go. Some pause for consolidation would seem to be in order, but a look at the pair’s momentum indicators does not yet suggest much overbuying at all, never mind the sort of extreme enthusiasm which might argue for a pause.

USD/JPY is now above its 20-, 50- and 100-day moving averages, but the 20-day crossed above the 50 on September 20. This is usually considered to be a pretty bullish signal and suggests that the pair has more to give bulls yet.

Japanese Yen Technical Analysis: Year's Lows Creep Back Into Focus

Immediate upside levels to conjure with on the daily chart look like July 12’s close of 112.59 and July 13’s 113.36.

Meanwhile the New Zealand Dollar has also staged an impressive bounce against the Japanese Yen this month, a month which started with the kiwi in a spot of trouble, at least as far as bulls were concerned. However, the latest rise seems to have petered out some way short of July’s 2017 high. This may be down to general jitters around the New Zealand currency ahead of this weekend’s general election, in the face of neck-and-neck polling and an uncertain coalition prospect.

It may this be too early to call current price action a definitive lower high, and the uncommitted could be well-advised to await the election result.

Japanese Yen Technical Analysis: Year's Lows Creep Back Into Focus

--- Written by David Cottle, DailyFX Research

Contact and follow David on Twitter:@DavidCottleFX