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USD/JPY Breaks Higher Toward 2018 Highs, US-China Trade War Fears Cede

USD/JPY Breaks Higher Toward 2018 Highs, US-China Trade War Fears Cede

Tyler Yell, CMT, Currency Strategist

USD/JPY Rate Forecast Talking Points:

  • The ONE Thing: If FOMC minutes lifts US yields further, USDJPY continues its ascent. A current limiting factor appears to be the underperformance of emerging markets that could weigh on risk appetite, but the possibility of a full-blown reversal appears limited as the JP bond market volatility remains depresses as the US’ picks up.
  • USD/JPY Price Forecast:Identifying support in an uptrend, and holding a bullish bias should be easy with Ichimoku at your back. Support comes in at the 9- & the 26-period midpoint at 110.27 and 109.53 respectively.
  • Not familiar with trade wars and their history? We got you covered

Monday’s price action saw USD/JPY trade to a four-month low on optimism that any tariff-induced trade war was on hold for now. The intraday high of 111.39 marked the highest price since January 18 and aligned with a rise in Japanese equities.

Coming up with reasons to be short USD/JPY is difficult work at a time like this when CFTC data shows that institutions continue to come off their extreme US Dollar short positions, and rising yields look set to life USD/JPY. If traders can find anything wrong with the trend, it may be it is too strong when looked at through the lens of RSI, which is near 2018 bullish extremes and may indicate a set-back (not to be confused with a trend reversal) is nigh.

The Bullish Big Picture for USDJPY

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

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

Technically Speaking on USD/JPY:

Resistance: 112.30/113.39 (Trendline resistance, YTD high)

Spot: 111.01

Support: 109.15/108.64 (trend structure support from May’s advance)

The only complaint bulls likely have about USD/JPY is that it has risen too aggressively to help identify re-entry points. Monday’s price action saw the pair rise to the highest level since January 18 with the January 11 and 12 highs now in focus at 111.88/69.

The focal point of support comes from the 9-period midpoint at 110.27. A hold above this level on a closing basis shows us that rising US yields will continue to lift USD and suppress JPY.

New to Ichimoku? Click here for a free guide if you’d like to learn more

More For Your Trading:

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.

Forex Trading Resources

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 feed has 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.

If you’re looking for educational information, our New to FX guide is there to help new(er) traders while our Traits of Successful Traders research is built to help sharpen the skill set by focusing on risk and trade management.

---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.

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