Trade Leader Alex Kazmarck of SpotEuro presents analysis of the JPY.
The Japanese Yen has been stuck within a range for the past two months, trading within the 101-103 level for the most part. Friday’s strong move continued into Monday as the USDJPY is now trading above the 103 figure for the second time in March; it briefly tested these waters for three days during the first two weeks of March. With today's commentary from Federal Reserve Chair Janet Yellen that the US economy will need extraordinary support for “some-time” and that the job market is not back to normal health have given traders appetite for more risk and thus we’ve seen a rally in equities as well as a sell-off in the yen as it is often used as a carry trade. While we remain in a volatile trading environment with the EU on the brink of easing to fend off deflation and geo-political concerns remaining in Eastern Europe, I think there is an outlook for both long and short trades in the near term.
USDJPY – the pair is once again trading above the 102.80 level and is aiming to break out of the wedge with resistance just above the 103.10 level. A close above March highs of 103.76 will be bullish for the pair and a close above the figure will lead to test the 105 level which should prove difficult; However, if broken and the daily price sets a new yearly high, we should see continuation higher. A failure to hold the 103 figure could lead to a broader sell-off and target the 100 figure and possibly deeper into the mid-90s, targeting the region in which the pair spent most of last year.
EURJPY – trading within a channel for the past two years with moderate consolidations, the pair can be seen within a wedge as of late, setting an important lower high in early March. With Friday’s bounce off of 140, the pair is now testing 142, just below the descending slope. If the pair breaks above, it will most likely target 145, the December 2013 high; however, a break below 140 will most likely lead a much deeper correction and target the 134/136 levels, which are previous resistance and support zones respectively. Until a close above the descending slope mentioned earlier and a close above 144, I expect a longer term bearish outlook more worthwhile from a risk/reward point of view.
GBP/JPY – also trading within an ascending channel during the past year and a half, the pair has begun to consolidate and correct lower over the past four months. Currently, enjoying momentum to the upside following a break of consolidation, the pair is aiming for the highs of 173.70 set in January and matched in March. While I expect the pair to trade lower than 175, which is December and January’s highs, a break above this figure could lead to another leg higher. Until this break, I expect further consolidation between 170 and 175 before a break below 168 leads to a deeper correction that should reach to prior resistance of the 160 level.
The yen mostly responds to risk-on/risk-off strategies due to its carry trade and safe haven status. All three are within a specified mid-term range or a wedge formation, attempting to break out to the top. If successful, technical all point to continuation to the upside; however, if we see another bout of risk-off selling, this could be seen as a failed attempt and a much deeper correction could be in the works. Considering the big gains during the last 18 months and consolidation taking place across different markets, I am looking for current momentum to wane and support levels broken in the next few weeks.