USDJPY – Two Weeks of Bullish Activity

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USDJPY – Two Weeks of Bullish Activity

By Adam Teen | Monday, December 12th, 2020

The Japanese economy had gone through a mixed news atmosphere this past week making it plunge just as much as it climbed. However, the bulls have won the fight on this one, with the last month of trading seeing the pair make a 10.4% gain.

The pair reached a new high on 5th December by touching 114.80 before retracting lower but the relaxation in bullish pressure did not go further than 113.45 (Dec 08). A strengthening dollar is the most apparent reason for that as traders now look at the USD as a safe haven compared to both the Yen and the Euro, of which the ECB decided to announce more Quantitative Easing on the Eurozone.

USDJPY Technical levels

The 200MA is on a climbing lane on both the H4 and H1 and has since proved to be a reliable spot for bounces to occur. The level was breached by a hairpin on 8 th December but this just proved to be a picture perfect reversal of the pattern that occurred on 5 th December before the decline.

The price action is widely expected to remain above the 200MA and the 113.26 support level (the price reached before the news about the ECB’s QE announcements. The bearish move early this week can be viewed as a spell of profit taking by traders to reload longs while taking advantage of the dollar uncertainty that grew as the Fed prepared to make policy rate decisions.

The pair is already 50 points above its Friday open of 113.75 just an extra sign that more bullish action will be seen into the coming week, albeit a high possibility of a little bullish relaxation before challenging higher levels.

The current top at 114.80 also coincides with the March – April 2020 highs. Once broken, the next crucial top is at 117.55. That resistance level was last seen in February 2020 before the pair started making a multi-month decline.

The pair is expected to make new highs over the next week, with the main news affecting the dollar being the widely expected US Federal Reserve announcements on the policy rates. The technical and volatility however favours the bulls even as the US goes into a crucial trading week.

USDJPY Trade Ideas

To the downside, traders can expect the 114.00 psychological support to hold strong even if prices drop below the current levels. It may bring some sideways trading before the actual support of 113.26 is tested in the coming week.

Traders should however be looking for long positions in light of the current bullish strength. There is no clear sign yet that the bullish move will relax soon. The positioning of the 55MA and the 200MA on the chart shows signs of widening and both MAs have slightly angled upwards.

The indicator attached also shows a strengthening bullish activity even on the short term, with the daily and weekly candles both green. Traders can place longs anywhere above 114.05 and target 114.76 and above.

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Weekly Bullish Engulfing On USDJPY

Marco Tosoni

FХ Strategist & Financial Commentator

During the last two months UsdJpy was stuck in a narrow trading range characterized by a really low volatility.

On the other hand, on the last two weeks, the activity of the pair increased because of the tensions between the United States and Iran,

with a fast sell off and a prompt recovery of the dollar that has led to the formation of a bullish engulfing, as we can see on the weekly chart.

The weekly closure of UsdJpy, set the test number seven of 109.65 area over the last 10 weeks.

At this point of time, given the strength of the the dollar, a breakout seems to be the most probable scenario, with the chance to accelerate towards 111.80 area where we can find the next resistance, marked between February and April 2020.

Looking at the RSI indicator, we are now in the neutral zone both on the weekly and the daily time frame and this is another confirmation element of a possible ulterior strengthening of the American currency.

The confirmation signal, as always, will be the breakout of the weekly and last Friday top, above 109.70 area.

While The stop loss must be placed below the last Wednesday’s bottom, at 107.60 with the classic 1 to 1 risk-reward ratio.

As always I recommend to trade carefully and to plan at best every move. Have a good trading and see you for the next video.

USD/JPY holding in bullish territories in the face of overcooked USD

USD/JPY is topping out in the 111 handle as the dollar loses steam and the pair falls into consolidation between 110.08 and 111.62. The US dollar has slowed in its advance following a series of intervention from the central banks seeking to free-up the USD liquidity and as the Federal Reserve moves to purchase unlimited quantities of Treasury bonds as well as mortgage-backed securities, direct purchases of corporate bonds, and direct loans to companies, loans which Congress now need to approve.

Watching currency wars

Apart from all of this, markets are now weighing the possibility fo currency wars following President Donald Trump’s comments that the strength of the dollar makes trade difficult. The question is whether the strength of the USD will trigger a round of concerted intervention. Indeed, the BoJ will be keeping a close eye on the market and to continue to provide liquidity through various open market operations and asset buying.

As for the yen, a switch in the FX playbook could see a flight to the yen considering COVID-19’s spread and negative fallouts for the global economy. However, as analysts, a Rabobank pointed out, even if the number of coronavirus cases and related mortality rates peaks in Europe and the US over the next few weeks, “this is likely to see panic reducing and USD strength ebbing.” “If the crisis is prolonged and the value of the USD continues to soar, however, concerted FX intervention to soften the dollar could be again on the menu.”

We next await the Treasury market’s reaction to the progress on the fiscal front as Congress continues to debate a $1.5-2tn “phase 3” rescue package. Democrats blocked the bill through the Senate arguing it focuses on the corporate sector and does little to help everyday people. While there has been no resolution to the stalemate situation, but it is expected to be resolved shortly which, combined with the latest move by the Fed to unlimited QE, should continue which on yields that have been heading lower this week (albeit, covering 6% today).

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