Bad data possibility of canceling Olympics pushing USDJPY higher Can it continue
Bad data, possibility of canceling Olympics pushing USD/JPY higher. Can it continue into fiscal year-end?
The news was not good for Japan this week. First, Japan extended its state of emergency due to the coronavirus to 5 more Prefectures. In addition, the Bank of Japan downgraded their forecast for near-term growth. Inflation and PMI data released today were both horrific. There is even talk that the Tokyo Olympics this summer will be outright canceled, not just postponed. The negative news is weakening the Yen vs the US Dollar. Can this move continue?
On a weekly timeframe, USD/JPY put in a high of 125.68 in June of 2015 and has been trending lower since. The downward sloping trendline off that high comes in now at near 109.25 and moves lower each week.
Source: Tradingview, City Index
On a daily timeframe, the chart shows the extremely volatility that took place in USD/JPY between mid-February and mid-March during the early part of the pandemic, in which price moved from 112.22 down to 101.18 and back to 111.71! The pair has continued lower in an orderly fashion, and as of July 2020, is in the process of forming a descending wedge. The top downward sloping trendline of the wedge is near 104.50, which is also the 61.8% Fibonacci retracement from the highs of November 11th, 2020 to the lows of January 6th. The bottom trendline of the wedge crosses near 102.34, just below the January 6th lows of 102.59.
Source: Tradingview, City Index
Where to next? On a 240-minute timeframe, since November 6th, USD/JPY had been forming a descending wedge (within the daily descending wedge), and broke higher out of the wedge on January 6th. After the breakout, the pair pulled back to test the top trendline of the breakout (as so often does). In doing so, USD/JPY pulled back to the 61.8% Fibonacci retracement level from the January 6th lows to the January 11th highs near 103.30, forming a potential flag pattern (red). The pair appears ready to break higher out of the flag pattern and make its way towards the target, near 105.00. A break below 103.30 would invalidate the flag patten and open the door for a move back down to 102.59. Horizontal resistance ahead of the 105 target is near 104.38 and 104.77 (as well as the downward sloping trendline on the daily timeframe near 104.50).
Source: Tradingview, City Index
USD/JPY has already broken above the downward sloping trending on the 240-minute timeframe. If price reaches the flag target near 105, it will also have broken through the downward sloping trendline on the daily timeframe. As mentioned, the downward sloping trendline on the weekly timeframe crosses near 109.25 and moves lower each week. USD/JPY bulls will be looking to buy dips to push price to that level!
Remember this as well: the fiscal year-end for Japan is March 31st. Japanese domiciled companies want a weaker Yen to repatriate funds from abroad at a cheaper price. The BOJ has been known to intervene in the fx markets in the past to weaken the Yen into year-end. Watch for possible intervention over the next few months, especially in USD/JPY moves lower.
Learn more about forex trading opportunities.
This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.
StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.
In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.
StoneX Financial Pte. Ltd. is not under any obligation to update this report.
Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.
ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.
City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.
The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.
The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.
The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.
StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.
This advertisement has not been reviewed by the Monetary Authority of Singapore.
© City Index 2024