Trade Calls on the Japanese Yen
- JPY: 4 out of 7 DailyFX Analysts Looking to Short the Japanese Yen
- GBP: Mixed Views on the British Pound
Over the past few weeks, the Japanese Yen has had a very mixed performance against the majors, which is why there are divergent views amongst the DailyFX team. Most of the analysts are looking for more upside in the Yen crosses and a breakout in USD/JPY before initiating a position. Saettele and Spivak, who are longer term traders are looking for a move lower. Read on to hear our views.
Chief Currency Analyst - Kathy Lien
My picks: Buying USD/JPY a break above 107.50
Expertise: Combining Fundamentals with Technicals
Average Time Frame of Trades: 1-3 Days
I'm looking for an upside break in USD/JPY. It is currently trading at 107.40 which actually happens to be a critical resistance level. At 107.45-107.50 is the 200-day SMA and the 61.8 percent Fibonacci retracement of the 114.66 to 95.75 bear wave.
The rebound in stocks yesterday was impressive. With no major US economic data due for release today other than MBA mortgage applications, the primary driver of USD/JPY will be US equities. Stock futures are already higher thanks to a smaller than expected drop in profit. If USD/JPY breaks above 107.50, it should be all clear for a run up to 108.50. I'm looking to buy USD/JPY above 107.50.
Senior Currency Strategist - Boris Schlossberg
My picks: Long GBPJPY
Expertise: Fundamental
Average Time Frame of Trades: 12-24 hours
With equities proving a supportive environment for carry trades I like GBPJPY to the long side. Although the UK data has been extremely weak, it is very unlikely that the BoE will cut rates tomorrow and the sense of relief may provide some additional fuel for pound gains as interest rate differentials remain in place.
Technical Currency Analyst - Jaime Saettle
My picks: USDJPY Short
Expertise: Technical
Average Time Frame of Trades: 1 Month
The rally from 95.72 is viewed as a correction but there is no evidence that the correction is complete at 108.57. The drop does not count as an impulse but that does not mean that the drop will not become an impulse. The 200 day SMA has held as resistance (on a daily closing basis) since early June. The combination of a 3 wave rally (from 95.72) and the presence of the 200 day SMA warrantes a bearish bias against 108.57. The target is below 104.99.
Currency Analyst - Terri Belkas
My picks: Long GBP/JPY
Expertise: Fundamentals Combined With Technicals
Average Time Frame of Trades: 1 - 3 days
I think the GBP/JPY consolidation above 210.00 shows potential for a break higher. The 60-minute charts reflect price holding above a short-term rising trendline and a daily pivot point at 210.68, while the daily charts show RSI stabilizing above 50 (bullish). The June 26 high of 213.90 provides a nice bullish target, but ideally, one could look for a move up to the confluence of the 38.2% fib of 251.10 - 192.47 and 200 SMA at 214.85/215.06. From a fundamental perspective, the Bank of England's rate decision on Thursday provides heavy event risk for the pair, but with the central bank unlikely to cut rates (bullish for GBP) and equity markets holding up above Monday's lows (JPY bearish), it looks like the odds are in favor a move to the upside.
Currency Analyst - David Rodriguez
My picks: AUD/JPY Long
Expertise: Quantitative Analysis, System Trading, Trader Sentiment and Positioning
Average Time Frame of Trades: 2-10 weeks
I still like shorting the JPY against higher-yielders through the near term; the carry trade's resilience to equity market tumbles gives me confidence that high-yielders will remain bid. One of the primary recipients of said bids will be the Australian Dollar versus the Yen. One of the important things to watch for, however, is whether the AUD/JPY will be able to break out of its 1-month wedge. As such, I'm willing to wait until we see a break above near-term trendline resistance of 103.00. If the pair is able to break said round number, I see little in the way of fresh highs through the coming weeks.
Currency Analyst - John Kicklighter
My picks: Waiting for a USDJPY Breakout
Expertise: Combining Money Management with Fundamental and Technical Analysis
Average Time Frame of Trades: 3 days - 1 week
Risk appetite across the markets has been somewhat mixed with credit markets leveling out and equities stabilizing after last week's drop to multi-year lows. For the carry trade, this has developed into congestive price action and relatively tight ranges. Technically, this congestive price action is simply adding to breakout pressure across a number of yen pairs. For me, the USDJPY setup looks to be the most technically complex pair in the group with a major breakout a high probability within the next two weeks. For levels, I'm looking at a falling trendline from December 27th (could be extended to August 8th) that now falls around 107.80 (just above today's highs). More prominent however is the range high at 108.50 that has stood as major support and resistance over the past couple of years. For support, a rising trend from the March 21st - and includes a considerable number of tests) is further backed by the rising 50-day SMA at 105.75/90. A stronger floor though is read in the 105.00/25 region where the June 30th swing low was held up by a heavy confluence of fib levels.
If I wanted to approach this aggressively, range trade at half my normal size until a breakout is won could garner some income. However, with the aforementioned wedge closing the doors on possible price fluctuations (and since I already have exposure in EURJPY and CHFJPY) it is more prudent to await the breakout. This could be approached aggressively whereby the trade can be executed after the break of the wedge; or it may be approached cautiously waiting for a confirmed move above 108.50 or below 105.00. Since a cautious approach could erode profit potential substantially, I'll play it in a hybrid manner. A break of the wedge will mark the entry on my first lot (with a relatively tight stop and target - within the wider range); and the second lot will target entry on the move through the outer range boundaries with a much more aggressive target of 150 points or more.
Currency Analyst - Ilya Spivak
My picks: Short EURJPY
Expertise: Macro Fundamentals, Candlestick and Fibonacci Technical Analysis
Average Time Frame of Trades: 1 week - 6 months
The Euro uptrend against the Yen looks to be losing momentum with price action consolidating in a classic Rising Wedge formation since late February. The MACD oscillator offers negative divergence as confirmation. Fundamentals are supportive, with ECB President Jean-Claude Trichet going on record with a forecast of sub-par growth in the second quarter. Meanwhile, the Japanese exports sector continues to outperform expectations on emerging markets demand to carry the economy. Look to short on a daily close below 166.50 with a stop above 167.30. Initial target aims for the April high at 164.81.
DailyFX
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