News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
EUR/USD
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Oil - US Crude
Mixed
Wall Street
Mixed
Gold
Bearish
GBP/USD
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
USD/JPY
Bullish
More View more
Real Time News
  • What is seasonal change in volatility. Are we going through one right now? Find out: https://t.co/G0qfpOmMl2 https://t.co/HXCQzUQgxA
  • The US Dollar will be bracing for a cascade of political risks including the first presidential debate, ongoing stimulus talks, the Supreme Court vacancy against the backdrop of key employment data. Get your #currencies update from @ZabelinDimitri here: https://t.co/quU4MmUjxA https://t.co/jF6ubwRz1P
  • The Indian Rupee may be at risk to the US Dollar as USD/INR attempts to refocus to the upside. This is as the Nifty 50, India’s benchmark stock index, could fall further. Get your $USDINR market update from @ddubrovskyFX here:https://t.co/3wsYlSxd26 https://t.co/PfIVibmqn1
  • Did you know a Doji candlestick signals market indecision and the potential for a change in direction. What are the top five types of Doji candlesticks? Find out: https://t.co/td5WA4hCZC https://t.co/lKvEMf4QRe
  • Weakness in equity markets continued last week as losses built and technical patterns hint further bearishness might be ahead. Get your #equities update from @PeterHanksFX here: https://t.co/GGVrB3r7if https://t.co/HPHUC8EG3o
  • Forex liquidity makes it easy for traders to sell and buy currencies without delay, and also creates tight spreads for favorable quotes. Low costs and large scope to various markets make it the most frequently traded market in the world. Learn more here: https://t.co/5uSWKoLkd6 https://t.co/q80wSAoxXP
  • There is a great debate about which type of analysis is better for a trader. Is it better to be a fundamental trader or a technical trader? Find out here: https://t.co/aVAzFypAg1 https://t.co/7mc19Gxrvm
  • #Gold prices succumbed to selling pressure as the US Dollar soared this past week What is #XAUUSD facing these next few days and can these fundamental forces extend its selloff? Check out my outlook here - https://www.dailyfx.com/forex/fundamental/forecast/weekly/chf/2020/09/26/Gold-Price-Outlook-Rising-US-Dollar-Sinks-XAUUSD-Will-Losses-Extend.html?CHID=9&QPID=917702&utm_source=Twitter&utm_medium=Dubrovsky&utm_campaign=twr https://t.co/gPhy0KoW3W
  • GDP (Gross Domestic Product) economic data is deemed highly significant in the forex market. GDP figures are used as an indicator by fundamentalists to gauge the overall health and potential growth of a country. Learn use GDP data to your advantage here: https://t.co/38gTDnpPbn https://t.co/Xtk5g4JQEB
  • Many people are attracted to forex trading due to the amount of leverage that brokers provide. Leverage allows traders to gain more exposure in financial markets than what they are required to pay for. Learn about FX leverage here: https://t.co/3Wked6GBOp https://t.co/SsUguHB39W
Dominant Drivers Of USD/JPY Look To Be Pausing Ahead of JP Election

Dominant Drivers Of USD/JPY Look To Be Pausing Ahead of JP Election

2017-10-10 21:00:00
Tyler Yell, CMT, Currency Strategist
Share:

Key Takeaways:

  • USD/JPY technical strategy: close below Tenkan-sen (Ichimoku) concerning
  • Last week’s closing highs near 112.873 acting as firm closing resistance
  • IGCS Highlight: Pickup in long positioning favors resistance on price advance

The rebound in the US Dollar index caught some by surprise and others as a late arrival. The weakness that the US Dollar has seen over 2017 came as the markets began to discount a confident Federal Reserve on the back of a new US administration that was originally thought to bring a fiscal policy that would induce inflation and cause the Fed to hike aggressively.

However, as the year wore one and US economic data weakened, concerns rose that the Fed was getting ahead of themselves. The discounting by the market, which was most clearly seen via Eurodollar futures (different from spot EUR/USD), that the market was pricing in less than one hike over between December 2018 through the end of 2019. This was the extreme point reached in early September when a flurry of positive US data came through, and the Fed in mid-September voiced confidence in hiking again in December and more in 2018.

From mid-September, USD/JPY rallied from 5.5% or ~600 pips from 107.31 to 113.43 over the span of a month. When looking at the chart, you can see an ominous pattern that deserves technical trader’s attention. When overlaying the local trend following indicator, Ichimoku Kinko Hyo (access a guide to explain the indicator here under the advanced tab), you’ll notice a concerning trend. As I’ve highlighted on the chart below,when the price of USD/JPY breaks below the 9-period mid-point, known as the Tenkan-sen, that price tends to drop aggressively or least that’s been the pattern since mid-march.

Should that pattern play out, which is counter to the insight provided from IGCS, we could see another move lower in USD/JPY toward the 108 region. Adding to the drama, and uncertainty of USD/JPY, political risk has seeped into the USD/JPY trade as a snap election called by PM Shinzo Abe to gain a further majority in the lower house. However, an upstart party, the new Party of Hope, led by Tokyo Governor Yuriko Koike could spoil the party (excuse the pun) and add further volatility to the picture.

Insight from the options market has picked up on JPY calls (USD/JPY downside) open interest with expiries set near Oct. 22 (election day). Consensus remains that an Abe coalition sails through, but any upset would likely see those options exercised and a punch lower in all JPY crosses. Since 2012, when Abe’s Liberal Democratic Party came to power, Abe has been synonymous with JPY weakness, and any change in the political landscape could cause sharp moves. The other side of the outcome, a secured Abe victory would likely see USD/JPY break above recent resistance near 112.87/113.21 and open the charts up for a run to recent resistance at 114/15.

Daily USD/JPY Chart: Strong resistance into 112.87/113.26 Zone

Dominant Drivers Of USD/JPY Look To Be Pausing Ahead of JP Election

Chart Created by Tyler Yell, CMT

USD/JPY Insight from IG Client Positioning: Pickup in long positioning favors resistance on price advance

The sentiment highlight section is designed to help you see how DailyFX utilizes the insights derived from IG Client Sentiment, and how client positioning can lead to trade ideas. If you have any questions on this indicator, you are welcome to reach out to the author of this article with questions at tyell@dailyfx.com.

Dominant Drivers Of USD/JPY Look To Be Pausing Ahead of JP Election

USDJPY: Retail trader data shows 41.1% of traders are net-long with the ratio of traders short to long at 1.43 to 1. The number of traders net-long is 2.8% lower than yesterday and 14.3% lower from last week, while the number of traders net-short is 16.4% higher than yesterday and 33.1% higher from last week.

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

---

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

To receive Tyler's analysis directly via email, please SIGN UP HERE

Contact and discuss markets with Tyler on Twitter: @ForexYell

Access Our Free Market/ Trading Guides Here:

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

DISCLOSURES