CURRENT MARKET CONDITIONS NOT AS FAVORABLE TO YEN AS IN PAST; BUY USD/JPY @98.00
Fundamental Catalyst – Traditionally, increased risk aversion and fears of global instability have favored currencies like the USD, Yen and Swissy. However, in the current market environment we have seen some strong evidence of a shifting out of some of the more traditional lower yielding/safe-haven currencies in favor of the USD only. Rapid deterioration within both the Japanese and Swiss economies along with implementation of active intervention policies (most recently the SNB) have managed to easily offset any lure that these currencies once offered with the USD thereby emerging as the clear standout safe-haven choice. While we do not discount additional cross related buying in the yen relative to some of the other major currencies, we feel with respect to Usd/Jpy, the risks continue to be to the upside in light of the current economic environment.
Techs – Usd/Jpy: Although the market has been trading with a heavier tone on Monday, the overall structure remains constructive with the pair in the process of undergoing some choppy consolidation ahead of the next move. While we see no compelling reason to establish longs at current levels by 98.70, we do see good risk/reward opportunities on dips to 98.00 today. The 98.00 handle coincides with a projected daily “ATR” (Average True Range) low and as such, we will look to buy on dips to the figure. This short-term strategy align with our medium-term bias which projects further upside over the coming days back to the 104.00 major double bottom objective off of the 87.15 multi-year lows. Strategy: BUY @98.00 FOR A 100.45 OBJECTIVE, STOP @96.80. Stops to be trailed to cost on a break back above 98.50. If trade triggers and 98.50 not broken, position to be closed out at NY close (5pm ET) on Monday. Recommendation to be removed if not triggered by NY close on Monday.
Written by Joel Kruger, Technical Currency Analyst for DailyFX.com
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