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
Oil - US Crude
Mixed
Wall Street
Bearish
Gold
Bearish
GBP/USD
Mixed
USD/JPY
Bearish
More View more
Real Time News
  • Forex Update: As of 02:00, these are your best and worst performers based on the London trading schedule: 🇯🇵JPY: 0.15% 🇳🇿NZD: 0.02% 🇨🇦CAD: -0.06% 🇪🇺EUR: -0.08% 🇬🇧GBP: -0.09% 🇦🇺AUD: -0.17% View the performance of all markets via https://www.dailyfx.com/forex-rates#currencies https://t.co/HbXlgqqEG4
  • IG Client Sentiment Update: Our data shows the vast majority of traders in Ripple are long at 97.34%, while traders in NZD/USD are at opposite extremes with 63.25%. See the summary chart below and full details and charts on DailyFX: https://www.dailyfx.com/sentiment https://t.co/RoqYFl8Oue
  • Silver prices plummeted over 8% on Monday, registering their largest single-day swing seen in more than one month. The potential cross over of its 20-Day SMA below 50-Day SMA is likely to form a “Death Cross”, which is a mid-term bearish indicator. https://t.co/N6OHzhZOzR
  • Key levels in forex tend to draw attention to traders in the market. These are psychological prices which tie into the human psyche and way of thinking. Learn about psychological levels here:https://t.co/1oygcFMFNs https://t.co/C2rRzTLN03
  • As the clock is ticking on US Presidential Election – an event that is highly important and may carry significant amount of uncertainty. Will you ride the volatility or stay on the sideline until the political skies are cleared in November? https://t.co/5EXpzyXHct
  • Wall Street Futures edged higher at Asia opening hours: Dow Jones (+0.12%) S&P 500 (+0.13%) Nasdaq 100 (+0.13%) [delayed] -BBG
  • Join @DanielGMoss's #Webinar at 10:00 PM ET/2:00 AM GMT for his weekly coverage of trading prep for $AUDUSD in the week ahead. Register here: https://t.co/wi1qabrtHJ https://t.co/bmOoBpGlZs
  • $AUDUSD dipping in morning APAC trade following a speech from #RBA Governor Guy Debelle He mentioned that an option possibly being considered for other policy prescriptions is to buy bonds 'further out along the curve' (relatively dovish) https://t.co/JXQktfCrj0 https://t.co/Xbyhuuy5b6
  • RBA's Debelle: 'Mixed' empirical evidence on negative rates, TFF increase is substantial easing of monetary policy -BBG #RBA $AUDUSD
  • RBA's Debelle: Lower #AUD would benefit economy, watching closely. FX intervention not effective in current circumstance -BBG $AUDUSD #RBA
USD/JPY Rate Forecast:  Looking Free To Rally As Pair Tests Ichimoku

USD/JPY Rate Forecast: Looking Free To Rally As Pair Tests Ichimoku

2018-04-24 15:30:00
Tyler Yell, CMT, Currency Strategist
Share:

USD/JPY Rate Forecast Talking Points:

  • USD/JPY Price Forecast: JPY weakness may accelerate on break > 100-DMA at 109.01
  • Options premium shows waning premium to protect against JPY strength lifting USDJPY
  • USD/JPY Rate Insight from IG UK: changes in retail sentiment favors price declines

On Tuesday, April 24, the US Treasury 10-Year note yield topped 3% for the first time since January 8, 2014. As the yield on the note began to break higher thanks to a confluence of rising commodity prices and declining risk premium, eyes rightfully turned to USD/JPY that appeared artificially low.

Now, looking to other factors, the upside for USD/JPY may still likely be in the works. While you can say the US Dollar is stretched in the short-term per short-term momentum readings, traders would also do well to recognize the aggressive institutional short-US Dollar positions that would need to unwind if the USD strengthens further. Should an unwind happen on the USD short trade, which could happen fast, USD/JPY looks to be a favorable place to see the unwind play out in FX.

Options Premium Shows Further Support For USDJPY Upside (Orange Line)

Please add a description for the image.

Data source: Bloomberg

See what we see when looking at the Japanese Yen. Check out our new Q2 Yen Forecast here.

The chart above shows the premium being paid to protect against JPY strength on the US Dollar via the options market. The market is called risk reversals and it helps you see where ‘insurance’ is being bid up to protect against a sharp move and the JPY is a common currency to gauge sentiment with via Risk Reversals over one-month.

Looking above, you can see the last time that traders were paying so little to protect against JPY strength was back in early January when USD/JPY was trading ~300 pips higher near 112. While this is not a full valuation model arguing that you should be long USD/JPY, you can see that the backdrop that favors further JPY strength continues to dissipate.

USD/JPY Rate Trades Above 100-DMA into Ichimoku Cloud

Please add a description for the image.

Chart Source: Pro Real Time, an IG Charting Package, IG UK Price Feed. Created by Tyler Yell, CMT

JPY weakness continues as the JPY has been sold off likely due to institutions frantically closing their YTD near-record short exposure on the pair via long JPY futures. On Tuesday, the price breached the 100-DMA at 109.02 and now faces the top of the Ichimoku cloud at 109.32. Given the positive backdrop for Bulls, traders are likely favoring a move to 110.

For traders who appreciate the Ichimoku cloud (click here for a free guide if you’d like to learn more), you’ll notice above that the recent trend of JPY strength that saw USD/JPY fall by over 7% appears to be eroding and giving way to a new uptrend.

Earlier, we shared the bullish options skew that favored a move higher. Another key driver that traders should be on the watch for with USD/JPY is a break of the lagging line on Ichimoku above the cloud. While there may be some volatility in the passage of that development (assuming it develops in the first place) as JPY option volumes on Monday were running 2.5X their 5-day average with strikes in the 110-112 range per Bloomberg, traders should keep their eye on the prize. Bullish targets beyond 110 favor an eventual move toward the 61.8% retracement point of the November to February range at that sits near 110.85 with stop losses focused around the recent pull-back low near 107.

A pull-back appears likely given that RSI(3) has USDJPY as one of the most stretched moves in the short-term, but a pull-back is likely to be viewed as an opportunity to buy the dip if the larger forces remain in play.

USD/JPY Insight from IG UK Client Positioning

USD/JPY Rate Forecast:  Looking Free To Rally As Pair Tests Ichimoku

Source: IG CLIENT SENTIMENT, data provided by IG

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests USDJPY prices may continue to fall. Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current USDJPY price trend may soon reverse higher despite the fact traders remain net-long.

---Written by Tyler Yell, CMT

Tyler Yell is a Chartered Market Technician. Tyler provides Technical analysis that is powered by fundamental factors on key markets as well as t1rading educational resources. Read more of Tyler’s Technical reports via his bio page.

Communicate with Tyler and have your shout below by posting in the comments area. Feel free to include your market views as well.

Discuss this market with Tyler in the live webinar, FX Closing Bell, Weekdays Monday-Thursday at 3 pm ET.

Talk markets on twitter @ForexYell

Join Tyler’s distribution list.

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

DISCLOSURES