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USD/JPY Moves Into Ichimoku Cloud As Trend Battle Scene Is Set

USD/JPY Moves Into Ichimoku Cloud As Trend Battle Scene Is Set

2017-05-05 21:00:00
Tyler Yell, CMT, Currency Strategist

Can USD/JPY break higher in Q2 like other JPY crosses? Here are our thoughts.

Talking Points:

  • USD/JPY technical strategy: anticipating breakout above cloud on risk sentiment
  • US data good enough (but, not great) to keep USD/JPY moving higher
  • Weekly high (113) and 100-DMA (113.20) focal resistance

USD/JPY has broken out of the bearish price channel that it has traded within for much of 2017. However, we still have some hurdles to climb before we get excited. The first hurdle is the 100-DMA, currently at 113.20. A breakout above this technical resistance followed by a close would likely bring a closing out of longer-term short positions that could further lift the pair.

While USD/JPY is trading higher, one should note that EUR/JPY traded to yearly highs on Friday. The gap between USD/JPY and EUR/JPY helps to show that as weak as the JPY may be, as evidenced in hitting new lows against EUR, USD is doing little favors for USD/JPY bulls hoping for the next breakout. Another way to see USD weakness is that DXY is trading at 2017 lows as of this writing.

Traders can see on the chart below that price is currently trading into the Ichimoku Cloud, which is a formidable form of resistance. Given the correlation of USD/JPY to yields, it appears that a stable rise in Treasury yields would likely keep USD/JPY higher, albeit not to the extent we see EUR/JPY or GBP/JPY higher.

Join Tyler in his Daily Closing Bell webinars at 3 pm ETto discuss market developments.

USD/JPY Moves Into Ichimoku Cloud As Trend Battle Scene Is Set

Chart Created by Tyler Yell, CMT

USD/JPY IG Trader Sentiment:Yen Mixed as Traders Go Short

USD/JPY Moves Into Ichimoku Cloud As Trend Battle Scene Is Set

What do retail traders’ buy/sell decisions hint about the JPY trend? Find out here!

USDJPY: Retail trader data shows 56.9% of traders are net-long with the ratio of traders long to short at 1.32 to 1. In fact, traders have remained net-long since Jan 09 when USDJPY traded near 117.828; theprice has moved 5.4% lower since then. The number of traders net-long is 6.0% lower than yesterday and 25.0% lower from last week, while the number of traders net-short is 6.5% lower than yesterday and 68.5% higher 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. Positioning is more net-long than yesterday but less net-long from last week. The combination of current sentiment and recent changes gives us a further mixed USDJPY trading bias.(Emphasis Mine)

The takeaway from me for IG Client Sentiment on USD/JPY is that shorts are getting more aggressive week-over-week and longs are retreating over the same time series. In taking a contrarian view, this opens up the likelihood of further upside. A break above the 100-DMA and this sentiment picture could precede a breakout.


Shorter-Term USD/JPY Technical Levels: Monday, May 5, 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.

USD/JPY Moves Into Ichimoku Cloud As Trend Battle Scene Is Set

Written by Tyler Yell, CMT, Currency Analyst & Trading Instructor for

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