Assessing Japanese Yen And Prospect Of Weakness

Daily and 1H: When the Euro and Pound rallied, both the USD and JPY slid. However, it has been the USD taking the brunt. The Japanese yen has been relatively weak, but against the USD it has been strong.

When I mentioned that Japanese yen may also start sliding on Friday’s update, I meant not only would it be pressured against euro, pound and commodity currencies such as CAD or AUD, but that it may also start sliding against the USD, and further against the CHF.

I mention USD and CHF because these conventionally gain in times of risk aversion, and lose when that risk appetite is returning.

The USD/JPY pair is at a low for the year, and is currently in consolidation.

However, I think the timing is not there yet for the Japanese yen to be in the frontline of risk appetite moves. The USD still has some further weakness relative to the JPY.

The daily shows a swing projection lower suggested by the negative reversal.

The 1H chart also shows negative reversal suggesting further decline.

Daily: The CHF has been strong since end of May. We saw the USD/CHF slide precipitiously.

The CHF/JPY rallied after a strong slide in April and May. Assessing USD/CHF, USD/JPY, and CHF/JPY together, we see that the level of weakness from weakest to most resilient has been, USD, JPY, and CHF.

In July however, the JPY matched the CHF in resilience and you can see the CHF/JPY in a congestion pattern. If the market breaks above the pattern, the Japanese yen is likely to slide, and the USD may start to stabilize.

As far as planning trades is concerned. If you are looking to long the GBP for example, or AUD, the USD is the weakness and best candidate at the moment. But, if you see the USD/JPY rally from a bottom, and the CHF/JPY break above its triangle, the Japanese yen may become the best candidate to long against.