Is The USDJPY's Bullish Push A Signal For All The Yen Crosses?
The dollar has produced a significant break against a number of its notable pairings this week. One of those shifts has come with the USDJPY which is further developing a bullish reversal from a double bottom that has pushed through yet another descending trendline. However, this significant move has neither developed carry through for the majors nor has it further catalyzed breakouts for the rest of the yen crosses. Is the USDJPY's breakout a leading indicator for the rest of the yen crosses? Our DailyFX Analysts look for direction from the Japanese currency through their yen picks for the week.
Questions about these picks? Visit the DailyFX forum for a Q&A with the Analysts.
Chief Strategist
Antonio Sousa
My picks: Sell CAD/JPY
Expertise: Global Macro
Average Time Frame of Trades: 1 month
During today's trading session I will be looking for opportunities to buy safe-heaven currencies like the U.S. dollar and the Japanese yen against high yielding commodity currencies like the Canadian dollar, Australian Dollar or New Zealand dollar. Investors’ appetite for riskier assets remains very weak and I think high yielding commodity currencies could be particularly vulnerable going forward. Moreover, with the world economy expected to collapse in 2009 is reasonable to think that the demand for commodities will also begin to dry up which could only mean further losses to export dependent countries like Canada.
Senior Currency Strategist
Jamie Saettele
My picks: none
Expertise: Technical
Average Time Frame of Trades:
If I were to trade the Yen at all right now, I would err upon being long given the series of higher lows and higher highs since the January 21 bottom. However, the USDJPY is approaching the January high of 94.67, which is likely to provide some resistance. From a wave structure standpoint, it is likely that either a triangle or a flat is unfolding from the December low at 87.09. I say this because both the advance from 87.09 and decline from 94.67 are in 3 waves. The subwaves of triangles and flats are 3 wave affairs.
Currency Strategist
John Kicklighter
My picks: Remain Long USDJPY
Expertise: Combining Money Management with Fundamental and Technical Analysis
Average Time Frame of Trades: 3 days - 1 week
When I laid out my yen cross from last week; technicals were the most important factor. Since all of the yen crosses are inevitably tracking risk appetite, it is more important to go with the yen cross with the most liquidity and that can set a precedence for a broad shift in the crosses. USDJPY fit the bill as the most liquid cross; and its technical layout presented the clearest setup for me to work with. With yesterday's close above 92.25, the pending position from last week was finally triggered. Looking at the development of the USDJPY and the other yen crosses, it looks like the long USDJPY is the best position to stick with this week. However, we need to see better support from underlying fundamentals to see significant follow through from this push from one of the market's favorite pairs. At this point, the advance looks to be more the work of the dollar rather than a rebound in risk appetite - which traditionally sees the yen sell off. While the Japanese currency may be losing its grip on the title of top safe haven currency, a rebound in risk appetite would still represent the biggest driver for a broad reversal behind the yen crosses. Therefore, until AUDJPY, EURJPY and/or GBPJPY confirm bullish sentiment with their own breakouts, I'll keep my outlook reserved.
When awaiting confirmation from a genuine shift in the underlying yen, trading conditions and strategy are of the utmost importance. At this point, thanks to an optimal entry with yesterday's close just above my target level, I am already well in the money and looking to get out on the first half of the position. The remainder of the position can be played with caution or it could swing for the fences - it all depends on how the yen develops amongst its crosses. A tentative second objective will be the Jan 6th swing high around 94.60. This is relatively close; but if the other crosses cannot produce their own bullish momentum, the correlation between these pairs will trip USDJPY's progression. At this point, it is most important to keep the trailing stop in place - which I have placed just below the rising trend that has developed over the past week and is visible on the 15-minute time frame (which happens to bring me close to breakeven on the second lot).
Currency Strategist
Terri Belkas
My picks: Stay Short EUR/JPY
Expertise: Fundamentals Combined With Technicals
Average Time Frame of Trades: 1 Day - 1 Week
Sticking with my pick from yesterday, I'm looking to stay short EUR/JPY with a stop above 118.18, as the weekly candle remains below key trendline resistance.
Currency Analyst
David Rodriguez
My picks: Flat the JPY for now
Expertise: System Trading
Average Time Frame of Trades: 2-10 weeks
I remain a medium-term bull on the Japanese Yen, but we have clearly seen big pullbacks in the USD/JPY and I expect those to continue. As I've highlighted in the "Quant Section" of our new Forex Morning Slices report, forex options markets are clearly leaning towards further short-term USD/JPY pullbacks. As such, I will stick to the sidelines for now, waiting for the best moment to once again go short the pair. Realistically, I can see the USD/JPY challenge near the 95.00 mark before clear chance for a stronger pullback.
Currency Analyst
Ilya Spivak
My picks: Exit USDJPY Short
Expertise: Macro Fundamentals, Classic Technical Analysis
Average Time Frame of Trades: 1 week - 6 months
I originally sold USDJPY as the pair broke below a triangle formation and the swing low from late October. Price action has now managed to close above the upper boundary of a bearish channel that has guided prices lower since mid-July. This threatens the validity of the down trend and suggests the fundamentals are setting up to take over from trends in risk sentiment as the key driver for price action. This week’s dismal economic data may have been the breaking the point: Japan’s GDP shrank an annual rate of -12.7% in the fourth quarter, confirming the world’s second-largest economy is mired in the worst recession since the 1974 oil crisis. Exit the trade at market and shift to a neutral bias for the time being.
For complete analysis of the major currency pairs, please see my latest technical outlook report.
Currency Analyst
John Rivera
My picks:Long USD/JPY
Expertise: Fundamentals Combined With Technicals
Average Time Frame of Trades: 4-8 Days
Despite a severe bout of risk aversion in the market the USD/JPY rose as the correlation between the Yen and risk aversion has started to breakdown. Therefore, my short USD/JPY trade last week wasn’t profitable as I expected that the relationship would hold and the pair would continue fall further. The greenback has become the main beneficiary of safe-haven flows and that appears to be holding true even against the Yen. The BoJ is desperate to see its currency weakened and although it doesn’t appear intervention is the source of the current sell off, the recent momentum could inspire the central bank to take advantage. The 100-Day SMA at 94.00 will be my initial target with 97.44 the November 25th high as the next level of resistance.
Currency Analyst
David Song
My picks: Stay Short USD/JPY - Tighten Stops
Expertise: Fundamentals and Technicals
Average Time Frame of Trades: 2 - 10 Days
The USDJPY continued to push higher this week, bucking the dominant trend, and I will tighten my stops as a result to preserve my profits for the trade. I will place my stop at 93.00 (78.6% Fib), and if we see the pair break above this level to make a run for the 1/6 high of 94.6, I will stay out of the dollar-yen until we see further confirmation of where price action is headed over the near-term.
Currency Analyst
Joel S. Kruger
My picks: USD/JPY Long Triggered @92.80 for 94.60 Objective, Stop @91.90
Expertise: Technical Analysis
Average Time Frame of Trades: 1-3 Days
Price action in the major is starting to look more constructive after the latest round of setbacks off of the early January 2009 highs stalled out perfectly by 87.15, to match the previous trend lows from December. With weekly stochastics just having crossed up from oversold, there is plenty of room for gains to run over the coming weeks. The market had been trading below the daily Ichimoku cloud since mid-September but the current push higher is threatening this trend. The top of the cloud currently resides at 93.85 and a move back above will undoubtedly attract fresh bids. Another potential bullish formation that could be taking hold on the weekly chart is a textbook double bottom with neckline resistance by 94.60. A break back above the neckline at 94.60 would be significant as this pattern trigger would project additional upside back above 100.00 and towards the 104.00 area. In the interim, we will be looking to target a direct test of the 94.60 neckline at a minimum over the next 24-48 hours.
DailyFX provides forex news on the economic reports and political events that influence the currency market. Learn currency trading with a free practice account and charts from FXCM.
The dollar has produced a significant break against a number of its notable pairings this week. One of those shifts has come with the USDJPY which is further developing a bullish reversal from a double bottom that has pushed through yet another descending trendline. However, this significant move has neither developed carry through for the majors nor has it further catalyzed breakouts for the rest of the yen crosses. Is the USDJPY's breakout a leading indicator for the rest of the yen crosses? Our DailyFX Analysts look for direction from the Japanese currency through their yen picks for the week.
Questions about these picks? Visit the DailyFX forum for a Q&A with the Analysts.
Chief Strategist
Antonio Sousa
My picks: Sell CAD/JPY
Expertise: Global Macro
Average Time Frame of Trades: 1 month
During today's trading session I will be looking for opportunities to buy safe-heaven currencies like the U.S. dollar and the Japanese yen against high yielding commodity currencies like the Canadian dollar, Australian Dollar or New Zealand dollar. Investors’ appetite for riskier assets remains very weak and I think high yielding commodity currencies could be particularly vulnerable going forward. Moreover, with the world economy expected to collapse in 2009 is reasonable to think that the demand for commodities will also begin to dry up which could only mean further losses to export dependent countries like Canada.
Senior Currency Strategist
Jamie Saettele
My picks: none
Expertise: Technical
Average Time Frame of Trades:
If I were to trade the Yen at all right now, I would err upon being long given the series of higher lows and higher highs since the January 21 bottom. However, the USDJPY is approaching the January high of 94.67, which is likely to provide some resistance. From a wave structure standpoint, it is likely that either a triangle or a flat is unfolding from the December low at 87.09. I say this because both the advance from 87.09 and decline from 94.67 are in 3 waves. The subwaves of triangles and flats are 3 wave affairs.
Currency Strategist
John Kicklighter
My picks: Remain Long USDJPY
Expertise: Combining Money Management with Fundamental and Technical Analysis
Average Time Frame of Trades: 3 days - 1 week
When I laid out my yen cross from last week; technicals were the most important factor. Since all of the yen crosses are inevitably tracking risk appetite, it is more important to go with the yen cross with the most liquidity and that can set a precedence for a broad shift in the crosses. USDJPY fit the bill as the most liquid cross; and its technical layout presented the clearest setup for me to work with. With yesterday's close above 92.25, the pending position from last week was finally triggered. Looking at the development of the USDJPY and the other yen crosses, it looks like the long USDJPY is the best position to stick with this week. However, we need to see better support from underlying fundamentals to see significant follow through from this push from one of the market's favorite pairs. At this point, the advance looks to be more the work of the dollar rather than a rebound in risk appetite - which traditionally sees the yen sell off. While the Japanese currency may be losing its grip on the title of top safe haven currency, a rebound in risk appetite would still represent the biggest driver for a broad reversal behind the yen crosses. Therefore, until AUDJPY, EURJPY and/or GBPJPY confirm bullish sentiment with their own breakouts, I'll keep my outlook reserved.
When awaiting confirmation from a genuine shift in the underlying yen, trading conditions and strategy are of the utmost importance. At this point, thanks to an optimal entry with yesterday's close just above my target level, I am already well in the money and looking to get out on the first half of the position. The remainder of the position can be played with caution or it could swing for the fences - it all depends on how the yen develops amongst its crosses. A tentative second objective will be the Jan 6th swing high around 94.60. This is relatively close; but if the other crosses cannot produce their own bullish momentum, the correlation between these pairs will trip USDJPY's progression. At this point, it is most important to keep the trailing stop in place - which I have placed just below the rising trend that has developed over the past week and is visible on the 15-minute time frame (which happens to bring me close to breakeven on the second lot).
Currency Strategist
Terri Belkas
My picks: Stay Short EUR/JPY
Expertise: Fundamentals Combined With Technicals
Average Time Frame of Trades: 1 Day - 1 Week
Sticking with my pick from yesterday, I'm looking to stay short EUR/JPY with a stop above 118.18, as the weekly candle remains below key trendline resistance.
Currency Analyst
David Rodriguez
My picks: Flat the JPY for now
Expertise: System Trading
Average Time Frame of Trades: 2-10 weeks
I remain a medium-term bull on the Japanese Yen, but we have clearly seen big pullbacks in the USD/JPY and I expect those to continue. As I've highlighted in the "Quant Section" of our new Forex Morning Slices report, forex options markets are clearly leaning towards further short-term USD/JPY pullbacks. As such, I will stick to the sidelines for now, waiting for the best moment to once again go short the pair. Realistically, I can see the USD/JPY challenge near the 95.00 mark before clear chance for a stronger pullback.
Currency Analyst
Ilya Spivak
My picks: Exit USDJPY Short
Expertise: Macro Fundamentals, Classic Technical Analysis
Average Time Frame of Trades: 1 week - 6 months
I originally sold USDJPY as the pair broke below a triangle formation and the swing low from late October. Price action has now managed to close above the upper boundary of a bearish channel that has guided prices lower since mid-July. This threatens the validity of the down trend and suggests the fundamentals are setting up to take over from trends in risk sentiment as the key driver for price action. This week’s dismal economic data may have been the breaking the point: Japan’s GDP shrank an annual rate of -12.7% in the fourth quarter, confirming the world’s second-largest economy is mired in the worst recession since the 1974 oil crisis. Exit the trade at market and shift to a neutral bias for the time being.
For complete analysis of the major currency pairs, please see my latest technical outlook report.
Currency Analyst
John Rivera
My picks:Long USD/JPY
Expertise: Fundamentals Combined With Technicals
Average Time Frame of Trades: 4-8 Days
Despite a severe bout of risk aversion in the market the USD/JPY rose as the correlation between the Yen and risk aversion has started to breakdown. Therefore, my short USD/JPY trade last week wasn’t profitable as I expected that the relationship would hold and the pair would continue fall further. The greenback has become the main beneficiary of safe-haven flows and that appears to be holding true even against the Yen. The BoJ is desperate to see its currency weakened and although it doesn’t appear intervention is the source of the current sell off, the recent momentum could inspire the central bank to take advantage. The 100-Day SMA at 94.00 will be my initial target with 97.44 the November 25th high as the next level of resistance.
Currency Analyst
David Song
My picks: Stay Short USD/JPY - Tighten Stops
Expertise: Fundamentals and Technicals
Average Time Frame of Trades: 2 - 10 Days
The USDJPY continued to push higher this week, bucking the dominant trend, and I will tighten my stops as a result to preserve my profits for the trade. I will place my stop at 93.00 (78.6% Fib), and if we see the pair break above this level to make a run for the 1/6 high of 94.6, I will stay out of the dollar-yen until we see further confirmation of where price action is headed over the near-term.
Currency Analyst
Joel S. Kruger
My picks: USD/JPY Long Triggered @92.80 for 94.60 Objective, Stop @91.90
Expertise: Technical Analysis
Average Time Frame of Trades: 1-3 Days
Price action in the major is starting to look more constructive after the latest round of setbacks off of the early January 2009 highs stalled out perfectly by 87.15, to match the previous trend lows from December. With weekly stochastics just having crossed up from oversold, there is plenty of room for gains to run over the coming weeks. The market had been trading below the daily Ichimoku cloud since mid-September but the current push higher is threatening this trend. The top of the cloud currently resides at 93.85 and a move back above will undoubtedly attract fresh bids. Another potential bullish formation that could be taking hold on the weekly chart is a textbook double bottom with neckline resistance by 94.60. A break back above the neckline at 94.60 would be significant as this pattern trigger would project additional upside back above 100.00 and towards the 104.00 area. In the interim, we will be looking to target a direct test of the 94.60 neckline at a minimum over the next 24-48 hours.
DailyFX provides forex news on the economic reports and political events that influence the currency market. Learn currency trading with a free practice account and charts from FXCM.
