USD/JPY remains a sell-on-rallies closer to 108.20/40 – Credit Suisse

USD/JPY up 42 pips to 107.90 today

Credit Suisse discusses USD/JPY tactical outlook and maintains a sell-on-rallies bias in the near-term.

“USD/JPY – Plentiful trade headlines keeping risk markets alert, with gyrations ensuring intraday positioning remains light and participants agile. USD/JPY exploring a 107.00/80 range and sense this is not the last we have seen of either parameter,” CS notes. 

Trading from a rally-selling standpoint – looking for closer to 108.20/40 to reinstate (more comfortable either fading sensationalist China headline), given how we resilient we have been (US equities & yields holding in well) – allowing to leverage vs. 108.50/109.00 broader band of resistance,” Credit Suisse adds.

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Where now for the USDJPY this week?

Via Bloomberg and Credit Suisse

With the the Fed and the BoJ now out of the way what is next for the USD/JPY for the coming week? I came across a piece on Bloomberg and a trade idea from Credit Suisse on where they see the USDJPY going next.

Via Bloomberg and Credit Suisse

US-China trade tensions

The de-escalation of the US-China trade tensions is likely to continue ahead of the People’s Republic of China’s 70th anniversary celebrations. This should mean JPY does not strengthen on risk off tones from this avenue next week. However, as long as twitter exists I see this as a fragile state of play, which to be fair, virtually all traders now realise.

No-deal Brexit 

No-deal Brexit fears should be muted while investors wait to see if there is another Brexit extension granted before the October 31 deadline. Also, in addition to B;loomberg’s note,  we know that Boris is having another attempt at getting a deal under the EU’s noses next week. Mild optimism is the mood underpinning the GBP at the moment. 

Quarter end positions

USD/JPY likely to consolidate around the 108.00 level as investors squaring up quarter-end positions will be likely be main factor on USDJPY movement.

Credit Suisse’s take on USDJPY

Credit Suisse have announced a limit order to short USDJPY at 108.50 with a target of 107 and a stop loss at 109.50. Their rationales is that with the BoJ stepping back from easing action rallies should be faded. The benefit of this view is that any JPY strength on risk off tones push the trade in the right direction.

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USD/JPY into positive territory as US stocks near record

USD/JPY to take a look at yesterday’s high

USD/JPY to take a look at yesterday's high

USD/JPY has erased today’s loss as equity markets grind higher. The S&P 500 opened 10 points lower but has steadily battled back and is now up 12 points to 3017 — just shy of the all-time record.

 

Watch out for stops in stocks and USD/JPY if they both break higher.

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Falling Treasury yields pull down USD/JPY

USD/JPY at the lows of the day

The market US 10-year yield is down 3.5 basis points to 1.99%. The note has given back all of yesterday’s move and remains near cycle lows.

That’s a surprise given the good news from Trump-Xi and yesterday’s better ISM print. The market is sending some worrisome signals about the global economy.

In turn, USD/JPY has slipped to the lows of the day and is now in the gap from the open yesterday.

USD/JPY at the lows of the day

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USD/JPY dropping further, emini equity futures dropping further also

This is gradually getting more and more credence – still have not seen it confirmed though

Yen crosses suffering further smashage

Equities globally getting pounded … 

  • Singapore Straits times off 2%
  • FT China A50 futures down more than 3.5% on open 

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USDJPY stuck in the mud. When will it break free? The price action will tell us.

Last week’s range was the lowest since January 2012

The USDJPY is stuck in the mud.

Last week, the range for the pair was only 52-53 pips wide. That was the most narrow trading week since January 2012. Its is 2019 now, so that makes it a 7+ year record.  That’s a long time and says the market is non-trending.

Last week's range was the lowest since January 2012

Non-trending leads to trending (it is either one or the other)   Looking at the hourly chart, the 110.55 to 110.94 is the “Red Box” that has confined the range over the last 3+ days.  The low is above the low from last week which was down at 110.42.   We currently trade at 110.83. 

If the price is to extend one way or the other, getting out of the “Red Box” is what traders will look for. The next thing they will look for is staying out of the “box” and showing momentum.   Absent that, and we remain in the mud.

I know that is somewhat obvious, but we as traders, need to recognize what is happening and then anticipate what might happen next.   

What I know is the price action tends not to sit in a 52 pip range for too long (or more recently a 40 pip range). At some point, there will be a shove that breaks the market higher or lower (PS. the price is doing nothing because “the market” does not know what to do next…yet).

Is there any other levels to eye other than the extremes?

The 100 and 200 hour MA (blue and green lines at 110.724 and 110. 683) tends to see the price action move above and below in non-trending markets. However, it still defines the bias. Trade above is more bullish. Move below is more bearish. 

Today, the price last tried to trade below,but that move failed near the 3 day lows.  However,  note what happened on the move back higher.  The price used the 200 hour MA (green line) as support and has moved higher over the last 3 hours or so.  

The buyers are making a play. They are more in control. Can they push above and outside the “Red Box”?  No one really knows (it might fail in which case buyer turn to sellers), but traders can anticipate the future from the wiggles and waggles from the intraday technical clues and hope that the bigger shove is just around the corner.

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USD/JPY slides as US stocks give back gains

S&P 500 fades back close to unchanged

USD/JPY is at the lows of the day, down 22 pips to 108.49, as the US stock market gives back gains. The S&P 500 is up 2 points after rising nearly 30 points shortly after the open.

The market had been upbeat about China talks but it’s going to be a long road. There’s also renewed talk about earnings next week and that’s sparking some flashbacks to the rough ride during Q3 earnings. Along those lines, watch out for more warnings about China’s economy from anyone who hits a soft patch.

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USD/JPY recovers some ground, moves towards 108 handle

Can USD/JPY break the glass ceiling?


Price is hovering between the 107.70-80 levels currently with the earlier retracement high being at 107.87. The key level in the near-term here is the glass ceiling at 108.00. If price shoots above that, it builds a strong conviction for a recovery back towards the 109.00 handle.

US equity futures are still trading tepidly with E-minis down by 1.3%. Nasdaq futures are down by 2.5% still on the day currently. But so far, that’s not stopping USD/JPY from attempting a move higher on the day.

Right now, the 76.4 retracement level comes into play once again and the 108.00 handle is key in that regard. There is some mention of the earlier moves being overdone/exacerbated by thin liquidity and worries about potential BOJ intervention so let’s see how much traders can factor that in further into the price here.

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USDJPY trends lower. Moves toward consolidation area.

Stepping to the downside with minimal corrective action

The USDJPY has trended to the downside today, cracking through technical levels in the process and with minimal corrective action.

In the process, the price fell below (see blue circles in the chart above:

  1. 100 hour MA (blue line in the chart above – currently at 113.45)
  2. Trend lines, 200 hour MA and 38.2% at the 113.369-113.44
  3. 50% and consolidation area at the 113.14-177
  4. 61.8% at 112.96

The next target on the hourly comes in at the 112.602-657.  That comes from the swings lows and highs before and after the November low at 112.299 (on November 20).  When a market bottoms, often there is a run to a low from what seems like a base (see 1-4 red circles). That run low (shaded red area) is often followed by a move back above and a retest of the prior swing area (red circles 6 and 7) before taking off (if it is a bottom).  We head back toward that bottom now.  

Drilling to the 5-minute chart, the price is trying to correct off the lows now and looks toward a test of the 100 bar MA at 112.907.  A move above, muddies the waters a bit for what has been a trend move lower.  The 50% of the last leg lower is at 112.938.  Often on a trend move lower, the price corrections will find sellers in the 38.2-50% area of the last leg lower.  The 100 bar MA sits between that area (see yellow area).

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USD/JPY climbs above 114.00 in third day of gains ahead of the London fix

USD/JPY up 20 pips

The US dollar continues to be in demand.

A fresh bid ahead of the London fix boosted it above 114.00 for the first time since November 13.

It’s now approaching a minor descending trendline and the November high of 114.21.

For me, I’d be more inclined to watch the clock. Yesterday’s USD-buying ended after the London close.

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