Get started

Usdjpyweekly

USDJPY CAUGHT BETWEEN IMPORTANT LEVELS At important announcements/changes in policies like the one today where BOJ implemented negative rates, it usually takes some time before the market sinks in the implications and positions accordingly. Currently, it is evident based on technical levels that USDJPY has touched the 116 important neckline (head & shoulders). Also, because of the surprising policy change made by the BOJ today with a vote of 5-4, the pair has since retraced back up to the channel support sitting at about 121.4 it broke out of 3-4weeks ago, touched it, and retreated. This support of the channel is now resistance - therefore, if price manages to break and close above, further upside is possible. We are in the middle of important levels to watch for market sentiment, is the BOJ policy a sign of recognised weakness in the economy? Or is it more easy money and better times ahead? Further complicating evaluations is the fact that the JPY has been seen as a safe haven in gloom & doom and uncertain times like our current times. However, with NIRP/ZIRP, will investors want to hold the JPY, or will capital outflow happen - leading to more carry trading? This may unfold to see the JPY losing it's status as a safe haven CCY.. what is so 'safe' about the JPY if BOJ continues to ease/further cuts rates when its unable to hit its inflation target? Additionally, we have to factor in the Fed. Are they still able to hike this year, given the recent developments? As always, I believe in a mix of both Fundamental & Technical Analysis to see a clearer picture. I stand neutral at the moment. Tread lightly. Sometimes, it's better to wait for the dust to settle.
by Jeuvici
USDJPY INSIDE DAY CANDLES: WATCH THE HIGHS AND LOWSHi all, please see this chart first, and press the "load new bars"/play button and see how it played out: I recently took notice of such formations and have come to appreciate its usefulness. RATIONALE: When a pair trends in a certain direction, and such a formation forms, it usually indicates indecisiveness/loss in momentum of the prevailing trend, because the candle's highs and lows (note: not closing price!) forms WITHIN the highs and lows of the previous candle. What happens next is traders will watch price action closely to re-determine the sentiment of the market, by watching if price breaks above/below the larger range (previous) candle. A break of the larger (previous) candle's range will likely see price spike in that direction at around 50pips or more, depending on the buildup of stops/orders. In such a scenario: Do note that prices tend to draw back after such price spikes because these are usually quick moves where may stops/orders are placed. However, after some consolidation, if prices do not withdraw and close back into the high/low range, it usually indicates a continuation prevailing direction. See an example of how it played out on this chart on 22-24th Dec 2015, and 4-5th Jan 2016 Recently, we have been seeing alot of such formations on the UJ daily due to heightened volatility and drastic moves. Today, another inside day candle might be underway in formation. UJ traders should watch the high (117.685) and low (115.973) closely in the subsequent days. Currently, I remain bearish for UJ, but like I have mentioned in my weekly outlook analysis, do watch out for BOJ surprises (eg. additional easing etc.) that may change sentiment. Godspeed
by Jeuvici
USDJPY Longer term OutlookA bigger picture look of USDJPY from 2006-now has seen dramatic volatility due to divergences in monetary policy & global outlook, with the JPY correlating to safe haven flows in times of crisis and uncertainty. From this analysis we can see that from 2006 - 2012: There was a clear downward channel trending from a high of 124.14 to a low of 75.56. From 2012 till now, we have seen a clear upward channel trending to a high of 125.85. Despite looking extremely symmetrical, notice also how the pair broke resistance (indicated by the blue lines) each time before breaking out to higher levels. However, what's unique this time was not only failure to break higher, but a break beneath this upward channel support. Throughout the past few years, we saw extended recovery and avoidance of recessions due to Quantitative Easing and other policies by Central Banks. However, businesses and economies go in cycles and this cycle cannot be avoided. I hence believe this downward breakout is a sign of the beginning of a larger move downwards for the pair, with a target of 110. I must however disclaim that this year is an important year for Japan, and the BOJ may step in to ease additionally if the strong JPY proves to dampen progress in their economy. This may lead to extended weakness in the JPY. Also note that the current leg down (123.47-116.50) for the USDJPY has been without significant retracement, so do expect one. Still, with worries of China and Commodities like oil, it all points towards additional risk-off sentiment in light of uncertainties about the global economy, where carry trades may continue to unwind and flow back into safe havens like Gold and JPY. See also my previous three ideas of USDJPY and how they played out, in related ideas. Best of luck to all.
Short
by Jeuvici
5