Dollar Yen Is In Focus Despite Volatility In The Crosses
Chief Strategist - Antonio Sousa
My picks: Long USD/JPY
Expertise: Fundamentals, Volatility and Sentiment
Average Time Frame of Trades: 1 day - 3 months
My favorite trading recommendation for Wednesday is to buy USD/JPY at the market for a 200 pips in profit potential with a stop in a daily close below 108. In a special report I did yesterday, I argue that since the U.S. dollar offers negative interest rates when adjusted by inflation, the U.S. Federal Reserve could be pressured to increase rates faster than traders had expected. In fact, we expect the Federal Reserve to increase rates by almost 150 bps in the next 18 months and dollar strength to continue. We expect EUR/USD to trade below 1.45 in 3 months and USD/JPY above 120 in 6 months.
Senior Currency Strategist - Jaime Saettle
My picks: NZDJPY Short (limit order placed at 77.70), against 80.50, target near 67.50
Expertise: Technical
Average Time Frame of Trades: 1 month
The NZDJPY is breaking down, having spiked below the August 2007 low this morning. An advance back to resistance near .7780 would present an opportunity to get short against .80. A longer term target is not until below .70. This is a longer term breakout trade.
Currency Strategist - John Kicklighter
My picks: Long USDJPY
Expertise: Combining Money Management with Fundamental and Technical Analysis
Average Time Frame of Trades: 3 days - 1 week
The yen has advanced against all its major counterparts over the past few days (and for many its has been a week or more of yen strength). Fundamentally, this move isn't rooted in strength underlying the economy - in fact GDP numbers recently showed a sharpest contraction for the world's second largest economy since 2001. Instead, this downdraft is being fueled by shifting interest rate expectations (mainly lower expectations for the high yielders) and a tangible increase to risk aversion. This means taking any trades based on technicals or typical fundamentals is a risky proposition.
Looking across the yen offerings, it would be dangerous to try to fight the momentum in the yen's run; but many of the pairs have already retraced deeply, so the rally is already mature and could start to flag in the near future. Regardless, it would be difficult to craft a good position for a long-yen position without a wide stop and relatively tight stop. However, one pair has an appealing technical, interest rate differential outlook and fundamental setup - USDJPY. This pair has been held up by expectations for the Fed to hike, the weak Japanese data and a generally overwhelming rally in the US dollar. Now testing a short-term rising trendline from the July 22nd swing low, 20-day SMA and the former resistance (now support) at 108.40/60 there is a good entry, stop and target levels to work with. My position will look to enter as close to support as possible with a stop modestly below the 20-day SMA and have the first target equal to this risk. The second target can be aggressive (multi-hundred points for a sustained trend) or it could be more cautious in holding below the recent swing high at 110.40. This is an unusual trade (given the dueling forces of carry and the dollar) so we will need to watch the momentum in the greenback and risk aversion closely.
Currency Analyst - Terri Belkas
My picks: Short USD/JPY
Expertise: Fundamentals Combined With Technicals
Average Time Frame of Trades: 1-3 Days
I still think there's downside potential for USD, as the dollar index is still holding below a falling trendline which connects the late 2005 - 2007 highs. Looking at the JPY crosses, the low-yielder has been very strong, but moves in USD/JPY have been muted. The pair is currently testing former resistance at 108.50, but given my bias on USD weakness I think USD/JPY could drop down for a test of at least the 38.2% fib of 103.76 - 110.38 at 107.89. From a fundamental standpoint, soft US retail sales figures this morning could weigh on USD as well, though heavy event risk looms on Thursday from the release of US CPI.
Currency Analyst - Ilya Spivak
My picks: Long USDJPY
Expertise: Macro Fundamentals, Classic Technical Analysis
Average Time Frame of Trades: 1 week - 6 months
USDJPY showed an Evening Star candlestick formation and is now retracing lower, with support seen at the 14.6% Fibonacci retracement of the 03/17-08/11 rally at 108.26. The pull back offers an opportunity to get into the long-term dollar appreciation taking root in the forex market. We will look to enter long from 108.26, looking for a run to 111.78.
Currency Analyst - John Rivera
My picks: Short USDJPY
Expertise: Combining Fundamentals With Technicals
Average Time Frame of Trades: 2-4 Days
The restoratiion of credit fears in the market by the JP Morgan $1.5 billion reported loss and the 0.1% decline in retail sales in the U.S. should increase risk aversion, which will benefit the yen crosses. If the Japanese GDP report which showed that the ecnomy shrank last quarter didn't weaken the pair, then it may look to trade back towards the 107.06 the 50.0% Fibo level of the 103.77- 110.36 rally. Target 107.06 with potential to 106.29.
DailyFX
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