Photo - Andreas Zanin
Andreas Zanin
Analysis | March 9, 2021

JPY outlook and forecast: USD/JPY

The USD has surged higher on the JPY but the upside from here is limited and we think that a trend reversal is near and the risk to reward swing trading short USD/JPY and also EUR/JPY.

The Rally in the USD has been caused by surging US bond yields But – “TFX margin flow data indicate heavy selling into this rally which could become a bigger influence on the approach of this technical level and the psychologically important 110.00 level.” (MUFG)

The smart money will sell into the level because: If US yields do rise further, this would weigh on equities and create risk aversion which would support the USD. Also, the Fed would likely intervene to try and stop a further move higher in yields.

Safe haven flows will kick in if we trade above recent highs in the 10 Year Note and a move above 1.65 would be the level to watch however if we fall back towards the 1.00 level we would expect the Yen to the firm. The Bigger move in our view would be if yields continue to the upside and create risk-off but a fall in yields is also bullish for the Yen. The surge in USD/JPY has skewed many crosses and caused Yen weakness and the Euro looks an attractive sell.

We are bearish the EUR V the USD and GBP which we have covered in previous posts and we now think a trend reversal in EUR/JPY is about to occur. The fundamentals for euro zone are dire in our view. The impact of lockdowns on economic growth is severe, the rescue fund is too small to help the poorer southern nations recover and we have a central bank with negative rates and bond yields are low.  Our view of the technical support and resistance levels to watch below:

USD/JPY

The surge higher has pushed the USD to overbought. On the chart below we have moved above the 109.00 level and we have now come back below this level – we view the USD as a sell through nearby support or if we pop above 109.00 again we view it as a sell back through 108.70. 110.00 is a huge level and we don’t expect it to be taken out on a close basis – stops should be back from the level and to correct overbought we expect a move back to 105.00 to retrace the recent high volatility move to the upside.

EUR/JPY

In terms of EUR/JPY on the chart below, we can see a tail exhaust into the 130.00 level and since that exhaustion, we have 8 candles which are low volatility and failing to follow through to test the level – we think a downturn through nearby support will lead to a sell-off on higher volatility to the downside to major support levels indicated – stop protection should be back clear of the 130.00 level.

 

 

Research provided by LearnCurrencyTradingOnline.com

The given data provided contains additional information, forecasts, analysis and market reviews published on the Key to Markets website.

Before making any investment decisions, you should know that:

– Key to Markets publishes analysis of any kind solely for information purposes and such analysis should not be construed as investment advice or a solicitation to buy or sell any financial instruments including without limitation CFDs.

– Key to Markets will not be liable for any loss or damage, which may arise, directly or indirectly from use of or reliance on the data provided by Key to Markets.

– Whilst all reasonable efforts are made to ensure that all content sources are reliable and that all information is presented, as far as possible, in a comprehensible, timely, accurate and complete manner, Key to Markets does not guarantee the accuracy or completeness of any information contained in the analysis.

– Past performance is not a guarantee of future results.

Latest Article
Improve your trading with a True ECN Broker
Trading account overview