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USD JPY - FUNDAMENTAL DRIVERSUSD FUNDAMENTAL BIAS: BULLISH 1. Monetary Policy The Jan FOMC decision was hawkish on multiple fronts. The statement signalled a March hike as expected, but Chair Powell portrayed a very hawkish tone. Even though Powell said they can’t predict the rate path with certainty, he stressed the economy is in much better shape compared to the 2015 cycle and that will have implications for the pace of hikes (more and faster). Furthermore, he explained that there is ‘quite a bit of room’ to raise rates without damaging employment, which suggests upside risks to the rate path. A big question going into the meeting was how concerned the Fed was about recent equity market volatility . But the Chair explained that markets and financial conditions are reflecting policy changes in advance and that in aggregate the measures they look at isn’t showing red lights. Thus, any ‘Fed Put’ is much further away and inflation is the Fed’s biggest concern right now. The Chair also didn’t rule out the possibility of a 50bsp hike in March or possibly hiking at every meeting this year, which was hawkish as it means the Fed wants optionality to move more aggressive if they need to. We didn’t get new info on the balance sheet and Powell reiterated that they’re contemplating a start of QT after hiking has begun and they’ll discuss this in coming meetings. Overall, the tone and language were a lot more hawkish than the Dec meeting and more hawkish than consensus was expecting. 2. Global & Domestic Economy As the reserve currency, the USD’s global usage means it’s usually inversely correlated to the global economy and global trade. Thus, USD usually appreciates when growth & inflation slow (disinflation) and depreciates when growth & inflation accelerates (reflation). With expectations that growth and inflation will decelerate this year that should be a positive input for the USD. However, incoming data will also be important in relation to the ‘Fed Put’. There are many similarities between now and 4Q18, where the Fed were also tightening aggressively going into an economic slowdown. As long as growth data slows and the Fed stays aggressive that is a positive for the USD, but if it causes a dovish Fed pivot and lower rate repricing it would be a negative input for the USD. 3. CFTC Analysis With the USD still sitting on the biggest net-long position for large specs and leveraged funds, the odds of mean reversion are always higher, especially with more than 6 hikes priced in for the Fed. However, if there is enough demand for safe havens due to further Russia/Ukraine challenges then positioning might not matter too much. 4. The Week Ahead It’s a relatively quiet week for the US on the data front. Tuesday kicks off with Markit Flash PMI’s where focus will be on whether the recovery in Retail Sales and Industrial Production was also felt in the forward-looking and sentiment-based PMI’s. In terms of USD reaction, as both are growth measures, there is the chance the USD sees a similar inverse reaction like we’ve seen with other growth measures in recent weeks. On the inflation side we do have the Fed’s preferred measure of inflation (Core PCE ) on the schedule for Friday. As the Fed has tunnel vision for inflation right now the print will be important for us to watch. After a solid beat in CPI and PPI the market is skewed towards an upward surprise, which means it will arguably take a very sizable move above maximum expectations to see a meaningful bullish reaction in the USD and US10Y , while it also means that a surprise miss, especially after CPI and PPI can have an outsized reaction to the downside for both. Fed speak will also be watched to see whether appetite for a 50bsp hike has grown. Keep in mind the Fed’s blackout period for the March meeting starts next week Friday (5 March), so any prep of a potential 50bsp move needs to be communicated clearly by the Fed before then in order to avoid jumping that type of surprise on markets when they don’t expect it. Risk sentiment will once again be a key potential driver for the USD given the heightened geopolitical risks around Russia and Ukraine. Any risk off flows from further fears of invasion or actual escalations should be supportive for the USD as the world’s reserve currency and a safe haven, while strong de-escalation is expected to be negative driver in the short-term. JPY FUDNAMENTAL BIAS: BEARISH 1. Monetary Policy No surprises from the BoJ at their Jan meeting. Despite some source reports which surprisingly suggested that the bank was starting to debate how soon a rate increase can be signalled, Governor Kuroda put that speculation to rest by stressing that the BoJ is not considering any hikes or tweaks to the current policy easing. The bank noted that risks to the inflation outlook are roughly balanced but risks to growth outlook is skewed to the downside. The Governor didn’t comment on specific FX levels, but said the current weak JPY is not bad for the economy. He also explained that it is not appropriate to stop the temporary inflation increases they are seeing by using monetary policy and that it’s too early to debate an exit from their current policy stance. The bank said that Japan will continue its expansive monetary policy unlike other G7s, and they are actively monitoring the economic impact from COVID-19 and won’t hesitate to add easing if necessary. 2. Safe-haven status and overall risk outlook As a safe-haven currency, the market's risk outlook is the primary driver. Economic data rarely proves market moving, and although monetary policy expectations can be market-moving in the short-term, safe-haven flows are typically the more dominant factor. The market's overall risk tone has improved considerably following the pandemic with ongoing monetary and fiscal policy support paved the way for markets to expect a robust global economic recovery. However, as the Fed and other banks start to normalize, we do need to remember that it means those fiscal and monetary policy support are being reduced, which could mean a lot more volatility for markets in the weeks and months ahead. Even though that doesn’t mean our med-term bias for the JPY has changed, it simply means that we should expect more risk sentiment ebbs and flows this year, and the heightened volatility can create some fantastic directional moves in the JPY, as long as yields play their part. 3. Low-yielding currency with inverse correlation to US10Y As a low yielding currency, the JPY usually shares a strong inverse correlation to moves in yield differentials, more specifically in strong moves in US10Y . However, like most correlations, the strength of the inverse correlation between the JPY and US10Y isn’t perfect and will ebb and flow depending on the type of market environment from both a risk and cycle point of view. With the Fed tilting more aggressive, we think that opens up more room for curve flattening to take place with US02Y likely pushing higher while US10Y underperform. In this environment we do see some mild upside risks for the JPY, but we should not look at the influence from yields in isolation and weigh it up alongside underlying risk sentiment and price action in the USD of course. 4. CFTC Analysis Even though the JPY’s med-term outlook remains bearish , the big net-shorts for both large specs and leveraged funds always increases odds of punchy mean reversion when risk sentiment deteriorates. Thus, equities & US10Y will remain very important drivers for the JPY in the weeks ahead. 5. The Week Ahead In the week ahead, we once again expect one of the biggest influences for the JPY to be on geopolitics, with further escalations in tensions between Russia and Ukraine expected to see safe haven inflows into the JPY, and any de-escalations expected to see safe haven outflows from the JPY. Apart from risk sentiment, we’ll also be keeping a close eye on US10Y . With risk sentiment still shaky, and prospects of the economy being unscathed by the Fed’s hawkish plans looking slim right now, we still expect long-end yields to push lower in the weeks ahead, and if that happens it should prove supportive for the JPY (of course keeping equities in mind as well as downside in yields but upside in equities would see both a push and pull effect on the JPY).
by thunderpips
3
DX - JPY Provides DXY ImpulseTightening Liquidity... Stronger Dollar. Bond Yields Higher... Stronger Dollar. Uncle Buck, the Lonesome Cowboy with just a hand held radio to keep him sane. ________________________________________________ This creates Gale force winds for the Indicies to Sail into. Typically it is the Northerlies that create the Marching Elephants in the Straights of Florida. 12 to 20 Foot waves that build as the Gulf Stream is countered by Surface opposition. __________________________________________________ A similar Natural phenomenon may be at work against the Indies. We will see as this week is set up for the Break Higher or Lower. Asia sees their own backyard, US Traders rarely bother, other than FX Traders, to observe how and why the pairs behave. A Carry trade is profitable if currencies are stable. They are NOT. The Dollar rising against the Yen can be a large issue on interest rate differentials - And Vice Versa. An important week ahead for FX as the DXY spiked last week. ___________________________________________________
ICEUS:DX1!
by HK_L61
USDJPY on Trendline ResistanceHello, my fellow traders hope you all are making some profits. We are here with our new analysis so that we can increase those profits for you. Let’s get into it. As we can see, the price is at its STRONGE TRENDLINE RESISTANCE. Let us know your views on this in the comment section. Thank you all. There is good news for our followers. We will be analyzing on-demand. So let us know which pair you want our analysis on, and we will get it for you. Do like and follow us
Short
by Ryan_lopes
USDJPY - Danske Bank expectationsUSDJPY To Drift Lower As Yield Curves Flatten & Reflation Runs Dry Cyclical outlook The “state of emergency” in big parts of the country including Tokyo was abandoned on 30 September, as the number of confirmed coronavirus cases has edged lower and the number of vaccinated people has continued to grow rapidly. Japan passed the US and EU on fully vaccinated long ago, which boosts the economic recovery in Q4. An extra stimulus package promised by the new government will support the economy further in the beginning of 2022. Monetary policy Fumio Kishida and his liberal democrats (LDP) were reelected with a comfortable majority in the 31 October lower house election. His new finance minister has expressed his support for the BoJ’s 2% inflation target. Whether the BoJ withdraws its special pandemic programme in March 2022 as planned will likely be decided on the December meeting. Given the short term outlook for the economy, it looks plausible, they will follow through. The BoJ has de facto tapered its asset purchases for a year now and the balance sheet has come close to a standstill at around JPY727 trillion. If you compare to the size of the economy, the Fed and ECB do not even come close to that size. Even so, inflation remains far off target with close to zero core inflation and it will be long before BoJ sees room to withdraw stimulus beyond the pandemic programme and its stealth tapering. External balances. Japan runs a current account surplus. Valuation. Our PPP estimate is around 90, i.e. suggesting an undervalued JPY, while our medium-term valuation model (MEVA) stands at 101. Positioning. Speculators are stretched short in JPY. Risks. Upside risks to USD/JPY primarily comes from the global economy remaining in reflation mode for longer than what we expect and Fed staying behind the curve on tightening. Significant change in risk sentiment causing US yields and commodities to decrease again could take USD/JPY quicker towards 100. Conclusion. USD/JPY has moved higher driven by particularly higher US yields. Increasing inflation and strong growth on a global scale has been a fruitful environment for USD/JPY but factories have reached production limits on a global scale while goods demand continues to be strong. As global supply struggles to meet demand, inflation pressures will force central banks to tighten while at the same time fiscal stimulus wanes, which will move the global economy out of reflation mode and in to a period with slower growth and less inflation. That will result in flatter yield curves and less pressure on commodity prices including oil, an environment with more tailwinds for JPY. If we add that speculators are stretched short JPY, it leaves USD/JPY risk skewed to the downside. We forecast the cross at 113.5 in 1M, 112 in 3M, 111 in 6M and 109 in 12M.
by thunderpips
3
Reverse Head and Shoulders Setup on USDJPY Target at 110.40Trend Analysis The main view of this trade idea is on the 15-Min Chart. The FX Cross USDJPY is in a reverse head and shoulders setup. The Left Shoulders is around the 109.65 support zone and the right shoulder is around the 109.60 price level. The Head of the pattern setup is at 109.40. The Neckline is situated at 109.90 resistance. Expectations are for the FX Cross to break higher from the Neckline and rally towards 110.40. This target is measured by taking the distance between the Neckline and the Head and projecting it higher from the Neckline. The Pattern will fail if prices were to decline below the Head before hitting the price target. Technical Indicators USDJPY is currently above its short (25-MA), medium (75-MA) and long (200-MA) term fractal moving averages. The RSI is currently above 50 with the KST also in a bullish position. Across multiple other timeframes, the technical indicators of USDJPY are displaying buy signals. Recommendation The recommendation will be to go long at market. Stop loss will be set around the 109.40 price level and a target of 110.40. This produces a risk-reward ratio of 1.04. Disclaimer The views expressed are mine and do not represent the views of my employers and business partners. Persons acting on these recommendations are doing so at their own risk. These recommendations are not a solicitation to buy or to sell but are for purely discussion purposes. At the time publishing, I have a position in USDJPY.
Long
by Ceddy86
AUDJPY close to ResistanceHello, my fellow traders hope you all are making some profits. We are here with our new analysis so that we can increase those profits for you. Let’s get into it. As we can see, the price is inside DESCENDING CHANNEL and is now close to RESISTANCE. One can go for sell after breakout from TRENDLINE SUPPORT. Let us know your views on this in the comment section. Thank you all. There is good news for our followers. We will be analyzing on-demand. So let us know which pair you want our analysis on, and we will get it for you. Do like and follow us
Short
by Ryan_lopes
4
USDJPY: My Trading Plan to Buy 🇺🇸🇯🇵 Hey traders, USDJPY is approaching a support line of a major rising channel on a daily. Taking into consideration that the price is trading in a bullish trend, the underlined point can give us a nice & safe spot for buying. To catch a bullish move, your confirmation will be a bullish breakout of an intraday falling channel on 4H. Wait for 4H candle close above its resistance, then buy aggressively or on a retest. Initial goal will be 110.96 In case of a bearish breakout of a support of a daily channel, setup will be invalid and bias will change to bearish. ❤️Please, support this idea with a like and comment!❤️
Long
by VasilyTrader
4