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Japanese Yen In Broad Retreat, US-China Trade Hopes Sap Haven Demand

Japanese Yen In Broad Retreat, US-China Trade Hopes Sap Haven Demand

David Cottle, Analyst
What's on this page

Japanese Yen Technical Analysis Talking Points:

  • USD/JPY remains in a solid uptrend
  • Some consolidation may be needed soon, however
  • EUR/JPY bulls seem more cautious but are still in command

Join our analysts for live, interactive coverage of all major Japanese economic data at the DailyFX Webinars. We’d love to have you along.

The Japanese Yen’s countercyclical ‘haven’ position has seen it weaken against the US Dollar since late August. Markets have become more cautiously optimistic on US-China trade truce prospects and also hope for more monetary accommodation from the major central banks.

USD/JPY has now risen consistently since basing on August 25. It has been in a well-respected uptrend channel ever since, gaining for twelve days out of seventeen.

US Dollar Vs Japanese Yen, Daily Chart

The uptrend channel is relatively narrow but nonetheless looks quite secure at present. The pair looks quite secure within it, too, with the lower bound more than a full Yen below the market at 106.80. That point must now be regarded as important near-term support, but there’s another likely prop closer to hand at 107.55. That’s the closing low of August 1, and important point for the bulls as they attempt to claw back the heavy falls seen between July 31 and August 5.

If they can do so by reclaiming the 108.73 region it could be a powerful psychological boost. That is the probable first key resistance. Dollar bulls should be able to get there but they may need a period of consolidation first.

Given the highly correlated nature of markets right now, it shouldn’t be a surprise that many major Yen crosses exhibit similar traits right now, and indeed they do.

EUR/JPY is no exception, but it has perhaps risen a but less vigorously than most, and bounced a bit more recently.

Euro Vs Japanese Yen, Daily Chart

On its daily chart the single currency seems to be trying to edge into a resistance zone marked by the closing top of August 13, a notable recent peak. It hasn’t quite made it there yet but, assuming risk appetite doesn’t get a left-field knock, it seems likely to, probably quite soon. A weekly close above that point would put August 6’s intraday top of 119.72 in play.

Japanese Yen, Resources For Traders

Whether you’re new to trading or an old hand DailyFX has plenty of resources to help you. There’s our trading sentiment indicator which shows you live how IG clients are positioned right now. We also hold educational and analytical webinars and offer trading guides, with one specifically aimed at those new to foreign exchange markets. There’s also a Bitcoin guide. Be sure to make the most of them all. They were written by our seasoned trading experts and they’re all free.

--- Written by David Cottle, DailyFX Research

Follow David on Twitter @DavidCottleFX or use the Comments section below to get in touch!

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