USD/JPY Rate Forecast Talking Points:
- The ONE Thing: JPY looks set to rally from current levels. The JPY looks hesitant to weaken aggressively from here which would prevent USD/JPY from moving higher. The juggernaut Yen is best viewed through the lens of EUR/JPY or GBP/JPY that continues to slide. Outside of USD/JPY, JPY strength is prominent.
- USD/JPY Price Forecast: An evening start pattern recently emerged against the 110 barrier and just below the 200-DMA. Such patterns tend to show a reversal and as a result JPY strength may emerge.
- US April CPI results are discouraging USD investors on a weak print of 0.98%MoM versus the 0.20% survey.
- USD/JPY Rate Insight from IG UK: recent changes gives us a stronger USDJPY-bearish contrarian trading bias.Sentimentis utilized as a contrarian technical trading tool, which derives insight from our Traits of Successful Traders research
Just when you thought US Dollar strength was a sure thing, it now looks like USD/JPY may be testing a potential double-top against 110. On Thursday, the US Dollar fell alongside the all-important US 10-year Treasury yields after inflation grew less than expected and in so doing, likely puts the brakes on the four-hikes in 2018 view that has recently helped to propel the US Dollar.
Looking at the chart, the 110 level on USD/JPY appears to be formidable resistance with the 200-DMA 20 pips higher at 110.2. Beyond 110.00/20 zone is the lower high from January 18 at 111.48. A breakdown below 108.54, the April 24 low would open up the view of a strong JPY re-emerging.
A key point we’ve made is that while JPY may strengthen, the US Dollar may be a hard way to play the strong JPY when you could choose a weaker British Pound as the play given the recent Bank of England Inflation report with a downgraded outlook. Additionally, money markets know are 50% for an August hike with the market mainly anticipating a hike in December thought a continuation of weak UK data could take GBPJPY lower still.
See what we see when looking at the Japanese Yen. Check out our new Q2 Yen Forecast here.
USD/JPY Rate Fails To Clear 200-DMA and 110, ST Double-Top In Focus
Chart Source: Pro Real Time, an IG Charting Package, IG UK Price Feed. Created by Tyler Yell, CMT
While the JPY has lost its top spot in the G10, the short-term chart appears to favor further JPY strength against the US Dollar. My recently released Intraday Ichimoku Dashboard shows a bearish reading on the hourly chart for both stature and momentum.
However, supporting points to the trend are mixed with hourly clouds showing as bullish along with the 9- & 26-period midpoint.
May 10 - Intraday Ichimoku Dashboard
Access one of our most popular articles on reading candlestick charts here
I am looking to Ichimoku levels of the 26-day midpoint or Kijun-Sen (108.34) and the current top-line of the cloud (107.33) as key support before switching from my view that USD will strengthen further vs. the JPY.
For traders that prefer Fibonacci to Ichimoku, the 23.6% retracement of the March to May range at 108.76 looks to be a clear support point. That level would align with a potential short-term double-top neckline and break below 108.76 could open a move toward 107.33, which also aligns with the 50% retacement of the same range.
Should JPY strength fail to materialize, the bullish targets are a combination of the 200-DMA (110.25 JPY per USD) and the trendline drawn from the 2017 high that comes in at 111.34.
New to Ichimoku? Click here for a free guide if you’d like to learn more
USD/JPY Insight from IG UK Client Positioning –Stronger Bearish Bias Develops
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.)
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Are you looking for longer-term analysis on the U.S. Dollar? Our DailyFX Forecasts for Q2 have a section for each major currency, and we also offer an excess of resources on USD-pairs such as EUR/USD, GBP/USD, USD/JPY, AUD/USD. Traders can also stay up with near-term positioning via our popular and free IG Client Sentiment Indicator.
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DailyFX offers a surplus of helpful trading tools, indicators, and resources to help traders. For those looking for trading ideas, our IG Client Sentiment shows the positioning of retail traders with actual live trades and positions.
Our trading guides bring our DailyFX Quarterly Forecasts and our Top Trading Opportunities, and our real-time news feedhas intra-day interactions from the DailyFX team. And if you’re looking for real-time analysis, our DailyFX Webinars offer numerous sessions each week in which you can see how and why we’re looking at what we’re looking at.
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---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.
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