Outlook and forecast: CAD/JPY, EUR/JPY & AUD/JPY

The Japanese Yen is at a bearish extreme and speculators are heavily short and we are at key levels in many pairs – if the JPY were to strengthen we would view is a good risk to reward buy our analysis of 4 Yen crosses below CAD/JPY, EUR/JPY and AUD/JPY

Sentiment: A Bearish Extreme and Speculators Heavily Short

The JPY is affected by risk appetite and suffers when stock markets are bullish – it’s also used as a carry trade due to negative interest rates to fund higher-yielding currencies and assets. Despite the market’s bearish view of the JPY and strong stockmarkets the JPY has moved up in June in all the crosses below…

Speculators hold large short positions in the JPY which limits downside in our view – we expect the large speculative position to get hit on stop and generate a short-covering Rally in the JPY.

In addition, we expect the concerns about the Fed cutting stimulus and raising rates quicker than the market expects to potentially trigger safe-haven buying in the JPY.

Technical Analysis

CAD/JPY

After the recent bounce, we are now seeing volatility drop as we stall above the 90.00 level and now expect a break back below this level to follow through to the downside. If we were to bounce to double trend line resistance we would look to sell weakness off the 91.00 level, stop behind the next round number so behind the 92.00 level.

EUR/JPY

We view the EUR as a sell-through today’s low, stop back behind the 133.00 level however, if we were to rally up to 133.00, we would look to sell weakness off the level with a stop back behind chart highs.

AUD/JPY

We are stalling into the 84.00 level and view the AUD as a sell-through today’s low stop back behind chart highs – If we were to rally up to 85.00 level we would look to sell weakness off the level with stop behind the next round number so behind the 92.00 level.

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