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USD, JPY Price Action Setups Ahead of Japanese Inflation

USD, JPY Price Action Setups Ahead of Japanese Inflation

2018-04-19 19:00:00
James Stanley, Strategist
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In this webinar, we looked at price action setups around both USD and JPY pairs. Tonight brings March inflation numbers out of Japan, and of recent, this has become a major push point for the currency as we’ve moved deeper into 2018. Canadian inflation is on the calendar for tomorrow morning, and we looked at a couple of CAD pairs, while bringing the focus back to longer-term dynamics in the US Dollar and potential setups on either side of the Greenback.

DailyFX Economic Calendar: High-Impact Events Remaining For This Week

DailyFX Economic Calendar: High-Impact Events Remaining for this week

prepared by James Stanley

Talking Points:

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If you’d like to sign up for our webinars, we host an event on Tuesday and Thursday, each of which can be accessed from the below links:

Tuesday: Tuesday, 1PM ET

Thursday: Thursday 1PM ET

US Dollar’s Range Continues

The range that’s been present in the US Dollar over the past two months looks set to continue, and reading inside of the move, it appears as though we may have a bit of strength on the horizon as bulls have helped to reclaim near-term support. This may bring on a deeper move towards the 90.00 level on DXY, or perhaps even a test closer to the March group of swing-highs around 90.50. Nonetheless, we took a balanced approach on the US Dollar in the effort of focusing-in on prevailing trends in related major markets.

USD/JPY in the Spotlight Ahead of Japanese Inflation

Later today we’ll get Japanese inflation numbers for the month of March, and as we’ve traded into 2018, that theme has started to take on more interest as rising inflation helped to bring on considerable strength into the Yen in Q1. As we’ve moved into Q2, that pressure behind Yen strength has started to dissipate, and in many areas, such as GBP/JPY, there’s been a return of the longer-term trend of weakness. February saw a 35-month high in inflation at 1.5%, and tonight’s expectation is for a 1.1% print. If we do see inflation scale-back towards one-percent, the door may be open for a continuation of Yen-weakness. We discussed this earlier today and, as we said then, Yen-weakness may be a bit more proactive in currencies that aren’t the US Dollar, such as EUR/JPY or GBP/JPY.

USD/JPY Four-Hour Chart: Bullish Channel Develops in Q2 After Aggressive Yen Strength in Q1

usdjpy four hour chart

Chart prepared by James Stanley

GBP/JPY Pulls Back After UK Inflation

We followed this breakout on the way-up, and that strength is giving back after yesterday’s UK inflation data for the month of March. While many still expect the Bank of England to hike rates in May at their next ‘Super Thursday’ rate decision, the case can be made that this potential hike is already well priced-in, and market participants are looking ahead to what happens next. The fact that inflation is folding does not make a strong case for tighter rates in the remainder of the year, and this could bring on even more pullback in the British Pound. In GBP/JPY, we looked at two potential support levels at 151.39 and 150.80. If support holds at either level, the door for upside remains open. If no support – no long positions.

EUR/JPY Trend Reversal

Yen-weakness reversed into Yen-strength in February, and this was quite visible in EUR/JPY as the pair hurdled below an area on the chart that had provided support for the final four months of 2017. This zone runs from 131.43-132.05, and this became resistance in February and March; but so far in April, buyers have been able to perch prices back-above that prior area of resistance that was also previous support. This keeps the door open for topside, and if we do see another bolt of motivation to Yen-weakness, the bigger picture bullish trend will be back in order in EUR/JPY.

EUR/JPY Daily Chart: Re-Claim of Key Support Zone

eurjpy daily chart

Chart prepared by James Stanley

USD/CAD Ahead of Canada Inflation

CAD weakness has started to show with a bit of prominence after yesterday’s BoC rate decision, and tomorrow brings March inflation data. There was a previous area of support that was blasted through last week, and that runs from 1.2723-1.2358. This could be lower-high resistance should tomorrow’s inflation data help USD/CAD rally up to this prior area of support.

GBP/CAD as an Alternative for CAD-Weakness

As we looked at above, the US Dollar could be a lackluster way to trade a theme of weakness in another currency given that the Greenback has been trending lower since last year. GBP/CAD could be an alternative, as this removes the US Dollar and allows the trader to focus on CAD-weakness with a currency that has displayed a recent spate of strength.

GBP/CAD Daily Chart: Pullback to Test Support at Prior Resistance

gbpcad daily chart

Chart prepared by James Stanley

GBP/USD for USD-Weakness

We’ve been following a rather robust topside breakout here over the past month, and that theme hit fever pitch this week ahead of UK inflation numbers for the month of March. Shortly after setting a fresh post-Brexit high on Tuesday, the pair has put in an aggressive reversal that has not yet shown signs of stopping. We looked at a couple of support levels that could be usable for topside, if support actually shows. These levels were at 1.4145 (which broke during the webinar) and then the zone from 1.4067-1.4088. Support holding keeps the door open for bullish continuation.

GBP/USD Four-Hour Chart

gbpusd four hour chart

Chart prepared by James Stanley

NZD/USD For USD-Strength

We’ve been following the bigger-picture range here for the past couple of months, and this week saw prices start to move-lower after oscillating around resistance. We published an analyst pick on the setup yesterday, and the door remains open for short-side continuation. We looked at how this recent bearish move could be incorporated into the longer-term setup.

NZD/USD Four-Hour Chart: Bears Assert Control

nzdusd four hour chart

Chart prepared by James Stanley

AUD/USD Trades Below .7750

We looked at this pair on Tuesday while plotting how short-side setups could be worked with. It’s been messy since then, but we were looking for a down-side break below .7750 to open the door for shorts, and that took place earlier today.

EUR/USD Still Ranging

There’s not much to work with here near-term, as prices have been range bound and both support and resistance are a bit too messy to work with. If we do get a break down to a deeper support, such as 1.2167, this could become interesting for bullish reversals. But for now, near-term price action is messy. Treat it as such.

To read more:

Are you looking for longer-term analysis on the U.S. Dollar? Our DailyFX Forecasts for Q1 have a section for each major currency, and we also offer a plethora 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 IG Client Sentiment Indicator.

Forex Trading Resources

DailyFX offers a plethora of 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 James Stanley, Strategist for DailyFX.com

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