Talking Points:
- USD/JPY Technical Strategy: move through 200-DMA likely signals strong follow-through
- U.S. 10-Year Treasury yield had largest intraday move on Wednesday
- Gold Reversal Shows Dumping Of Haven Assets
USD/JPY has become a focal post-election trade alongside EUR/USD and XAU/USD. All of these markets have been correlated over the last year as a weak USD has a significant impact on all three markets. We noted yesterday, and earlier this week in our webinars that options exposure that was likely triggered on the victory of President-Elect Trump. However, these executed trades were quickly reversed.
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On my post-election webinar, we discussed how similar the move in style though not the magnitude of the SNB de-pegging of EUR/CHF on January 15, 2015. In short, you had a massive move down in the USD vs. the CHF that then become almost immediately reversed. In those scenarios, no-one really wins during the volatility, but the rejection of one directional move helps to explain the undertones and trends in the market that are worth following.
USD/JPY has had multiple rejections of 99/101 zone, which may be indicative of either intervention from Japan to sell the JPY or unwillingness for institutions to hold long JPY positions against the USD below 101. Either way, we have seen a sharp move higher in US Yields that has helped fuel the USD rally. While there is an expectation that this move will retrace somewhat, the trend may be shifting higher as we look at the charts. The move higher in yields also aligns with the sharp reversal in Gold prices from Wednesday morning.
D1 USD/JPY Chart: USD/JPY Has Arrived At Long-Term Resistance Shortly After U.S. Election
Chart Created by Tyler Yell, CMT, Courtesy of TradingView
USD/JPY has tested and aggressively pushed off of the 99/101 zone multiple times since the Brexit vote was confirmed on June 24. The Thursday high took us momentarily above the 200-DMA at 106.583 and about 50 pips short of the post-Brexit July high at 107.49.
Further pressure on these levels would likely be met with a rushin of bids or fear of missing out a trade that could keep USD/JPY bid through the 107.49 high. Two indicators that have been helpful in addition to the zone of support of 99/101 is the Ichimoku Cloud and the Andrew’s Pitchfork channel tool.
The Ichimoku Cloud continues to support the price on a closing basis although the sharp initial sell-off on early Wednesday morning trading that we mentioned above was likely due to option exercises. Should the price continue to close above the Ichimoku Cloud, there is little reason to fight the potential for a strong base developing.
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Lastly, Andrew’sPitchfork above is drawn off of key pivots that are made from the 2015 high, August 24 low and the lowerhigh in November. This Pitchfork has done an outstanding job of framing price action and keeping our focus lower. As of mid-day Thursday, the price is sitting at the top of the channel, which it has not traded near since the Bank of Japan announced negative interest rates on January 29, which was then proceeded by a sharp decline in the pair as the JPY advanced across the board.
Wednesday’s sharp move lower is being treated as part a bottoming process. The Bullish view that I’m holding would be validated on a close above the resistance levels mentioned above at 106.63/107.49.
Shorter-Term USD/JPY Technical Levels: November 10, 2016
For those interested in shorter-term levels of focus than the ones above, these levels signal important potential pivot levels over the next 48-hours.
