USD JPY where to next

The appetite for risk has improved noticeably today, as evidenced by a sharp rebound across the global equity markets. FX traders have likewise witnessed the unwinding of some safe haven trades with CHF and JPY both falling sharply following their recent gains. The US dollar has performed well given the fact that the weekly unemployment claims disappointed expectations and after the minutes from the FOMC’s last policy meeting, released yesterday, contained very little in the way of new information other than what we already knew. However, as some FOMC members are concerned about the developments in China and Greece, the Fed may after all wait until the start of 2016 before hiking interest rates. The prospects of rates remaining low for slightly longer than expected could potentially be bad for the dollar. But so far the market seems happy to remain long the world’s reserve currency, as the other major central banks are nowhere near as hawkish as the Federal Reserve.

But the strong uptrend for the USD could end in the short term, especially against the yen. As can be seen from the chart, the USD/JPY broke below key support at 121.85/122.00 yesterday which led to a sharp sell-off as the longs rushed for the exits. But so far the bulls have managed to defend the rising trend line around 120.50 successfully. While this holds, the possibility for a rally back towards the aforementioned broken support at 121.85/122.00 is highly likely. But if this area then turns into resistance, price may go on to break the bullish trend line before heading further lower. The next level of support could be the psychologically-important 120.00 handle. Thereafter are the 61.8% Fibonacci retracement at 119.50 and then the 200-day SMA at 118.55. If however the USD/JPY breaks back above 121.85/122.00 on a closing basis then that would invalidate this potentially bearish scenario.

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.