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JPY Remains Quietly Strong As French Election Risk Remains

JPY Remains Quietly Strong As French Election Risk Remains

Tyler Yell, CMT, Currency Strategist

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Talking Points:

The Japanese Yen broke higher with JPY volatility gaining as a dominate risk prevails, the French Election. USD/JPY looks ready to break below 110 as the pair trades well within a falling price channel drawn with Andrew’s Pitchfork. JPY demand is seen throughout G10, which may persist unless the French election outcomes become clear. In addition to the global macro risk, we see reasons for a strong JPY within Japan as well with the recent Tankan survey showing pressure remains due to the anticipation of further JPY strength.

USD/JPY traded close to the March low of 110.07 on Tuesday, but there does not appear to be an environment supportive of a weak JPY anytime soon. UST Yields remain near multi-month support, and a breakdown, which would not be anticipated to carry far could easily keep a lid on USD/JPY upside and add a boost of USD/JPY shorts.

A technical break of 110 coupled with a drop in UST Yields would favor a move toward the 200-DMA that sits at 108.30. There is an attractive cluster of downside targets with a 100% Fibonacci Expansion of the December, February, and March price extremes near 108.43. The trade will hold with a stop at 112.20, the March 31 high, and target 108.43.

Another technical point with mentioning is the near-breakout per Ichimoku on the daily USD/JPY chart. Should the lagging line break below the cloud, it would provide a further preference of the current move lower in USD/JPY continuing.

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Chart Created by Tyler Yell, CMT

USD/JPY IG Trader Sentiment

USDJPY: Retail trader data shows 74.0% of traders are net-long with the ratio of traders long to short at 2.85 to 1. In fact, traders have remained net-long since Jan 09 when USDJPY traded near 117.189; the price has moved 5.5% lower since then. The number of traders net-long is 7.4% higher than yesterday and 2.3% lower from last week, while the number of traders net-short is 20.9% lower than yesterday and 12.2% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests USDJPY prices may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger USDJPY-bearish contrarian trading bias.(Emphasis Mine)


Shorter-Term USD/JPY Technical Levels: Tuesday, April4, 2017

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.

Contact and discuss markets with Tyler on Twitter: @ForexYell

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