USD/JPY: A sizeable reversal in USD/JPY following two failed attempts to close above its 200DMA (105.54). In turn, this opens the door to near term support at 104.39, marking the 100DMA and Jan 11th peak, where dip buyers may begin to emerge, while the trendline from the YTD low resides at 104.20-25, protecting the 200DMA at 103.91. Alongside this, looking at the option markets, the daily implied range from the EU open is 104.57-105.19, which may stem further declines in today’s session.
USD/JPY Chart: Daily Time Frame
One note of caution in chasing the move lower in USD/JPY at these levels, is the speed of the current move, which looks to have exceeded the move in both US rates and risk assets (Nikkei 225). Reminder that USDJPY trades relatively tight to the rates market, therefore JPY may have gotten ahead of itself.
USD/JPY vs Nikkei 225vs US 10YR Yield
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EUR/JPY Coiling for a Breakout
EUR/JPY: Once again the 127.00 provides a hurdle for further gains in the cross. However, while narrowing Bund/BTP spreads, rising oil prices and firmer risk assets reinforces the bullish case for EUR/JPY, given that FX vols remain subdued, the tighter range may persist in the short-term before the next breakout. On the downside, support resides at 126.00-15 and provided this level holds, the outlook remains constructive.
EUR/JPY Chart: Daily Time Frame
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