General sentiment has stabilized over the past week with many of the yen crosses cutting a path of congestion. More recently though, the yen has started to fall back suggesting a slow rise in risk appetite. However, with so many of these pairs near multi-year or record lows, is such a tempered boost meaningful? Could this be the lead in to something more significant or is it just a lull before dominant fundamentals are back at play?
Currency Strategist - Terri Belkas
My picks: Long NZD/JPY
Expertise: Fundamentals Combined With Technicals
Average Time Frame of Trades: 1 Day - 1 Week
I think the slow and steady rise of NZD/JPY from its January 21 lows and tight consolidation between roughly 47.00 and 48.00 has the potential to yield a breakout to the upside. It's possible to get in near current levels, with a stop below the January 21 low of 45.10 (be sure to account for the spread) and an initial target of 49.46 (the 38.2% fib of 56.32-45.10) and a secondary target of 50.74 (the 50% fib).
This afternoon's event risk (the Reserve Bank of New Zealand's rate decision) has the potential to shake the New Zealand dollar up, but the noted stop should be wide enough to account for this.
Currency Analyst - David Rodriguez
My picks: Flat the JPY for now
Expertise: System Trading
Average Time Frame of Trades: 2-10 weeks
For the past couple of weeks I've remained short the EUR/JPY and generally remained bullish the Japanese Yen. Yet yesterday I closed my short-EUR/JPY position, and I have grown increasingly neutral the Yen through recent trade. Overall I favor further rallies in the highly risk-sensitive Yen against the Euro, British Pound, Australian Dollar, and New Zealand Dollar. Yet I think we're in the middle of a bear market rally, and now is not the time to hold JPY-long positions. I'll keep a close eye on sentiment indicators to gauge when re-entry looks promising.
Currency Analyst - Ilya Spivak
My picks: Remain Short USDJPY
Expertise: Macro Fundamentals, Classic Technical Analysis
Average Time Frame of Trades: 1 week - 6 months
I sold USDJPY as the pair broke below a triangle formation and the swing low from late October. Last week, I noted the pair was showing an Evening Star candlestick pattern after a brief upswing ooked ready to resume downward momentum. A stray wick low would see USDJPY test as low as 0.8710 but broad positioning has remained confined to a narrow 100-pip range below 0.8860. With little to suggest a substantive change in overall bias, continue holding short targeting 84.25 at the record-lowest monthly close from 04/1995.
Currency Analyst - John Rivera
My picks:Long USD/JPY
Expertise: Fundamentals Combined With Technicals
Average Time Frame of Trades: 4-8 Days
I was prudent last week to maintain my bearish bias as the USD/JPY went into a free fall shortly thereafter to a low of 87.145. However, we have since seen the pair retrace to as high as 90.00 and risk appetite is on an uptrend. My long position on Monday was generating a profit until the current retrace after the test of 90.00. The 20-Day SMA is looming for all the yen crosses. I am going to maintain my long position from Monday. If I see resistance at the technical levels then I will close it. However, a break above will lead me to add to it.
Currency Analyst - David Song
My picks: Remain Short USD/JPY
Expertise: Fundamentals and Technicals
Average Time Frame of Trades: 2 - 10 Days
After reaching a low of 87.14 in December, the USDJPY rallied to a high of 94.61 on 1/6, but the lack of momentum to retrace the sharp sell off in January continues to favor a bullish forecast for the Japanese yen. I have held a bearish outlook for the pair since the sharp retracement this month, and expect the dollar-yen to hold its downward trend over the near-term as risk trends continue to drive price action in the forex market. Over the remainder of the week, we may see the pair retrace the downturn from the previous week to retest 90.00 for short-term resistance, but as investors remain bullish against the yen, the pair may work its way towards the December lows to test for support.
Currency Analyst - Joel S. Kruger
My picks: Buy CAD/JPY @74.10, for 80.45; stop at 70.90
Expertise: Technical Analysis
Average Time Frame of Trades: 1-3 Days
Inter-day price action is now showing that the price is looking to carve out yet another base in familiar territory after failing below 70.00 to 68.45 last week. The cross has been extremely well propped on dips to the 70.00 area (24/27/28Oct & 5/12/19Dec & 15/21/22/23Jan) and with daily studies starting to turn back up, scope exists for a more material corrective bounce back towards the range highs at 80.45 over the coming days. Both slightly shorter term and longer-term analytics confirm with the hourly chart now taking the form of an inverse head & shoulders-like structure while the weekly looks to be putting in a bullish reversal after taking out the previous weekly high. Price action on the Yen crosses across the board has been starting to look more constructive this week which is encouraging for the trade and we like exercising the Yen weakness through Cad with this cross being the only major one thus far to take out the previous weekly high. Look for a break back above 74.00 to solidify outlook and accelerate gains.
Fundamental Catalyst - The yen crosses have been decimated over the past several months on the back of a heightened bout of risk aversion and flow of funds back into the lower yielding and safer currencies. However, the negative carry seems to be finding some support across the board now with the broader global macro stabilization. While the outlook is still uncertain, many believe that we have seen the extreme market liquidation. Despite all of the losses to buy-side and sell-side shops, there is is still talk of plenty of cash on the sidelines. Additionally, the cross has also been suffering at the hands of the slide in oil prices. However, as we wrote yesterday, oil could be finding some value at current levels and looks to be basing out on the longer-term chart. Canada is an oil-centric economy which stands to benefit from higher oil prices while Japan needs to import all of its oil. As such, it stands to reason that CAD/JPY will be a great beneficiary should risk appetite pick up and oil prices start to show signs of a bottom.