The dollar has produced a significant break against a number of its notable pairings this week. One of those shifts has come with the USDJPY which is further developing a bullish reversal from a double bottom that has pushed through yet another descending trendline. However, this significant move has neither developed carry through for the majors nor has it further catalyzed breakouts for the rest of the yen crosses. Is the USDJPY's breakout a leading indicator for the rest of the yen crosses? Our DailyFX Analysts look for direction from the Japanese currency through their yen picks for the week.

Senior Currency Strategist - Jamie Saettele

My picks: none
Expertise: Technical
Average Time Frame of Trades:

If I were to trade the Yen at all right now, I would err upon being long given the series of higher lows and higher highs since the January 21 bottom. However, the USDJPY is approaching the January high of 94.67, which is likely to provide some resistance. From a wave structure standpoint, it is likely that either a triangle or a flat is unfolding from the December low at 87.09. I say this because both the advance from 87.09 and decline from 94.67 are in 3 waves. The subwaves of triangles and flats are 3 wave affairs.

Currency Strategist - Terri Belkas

My picks: Stay Short EUR/JPY
Expertise: Fundamentals Combined With Technicals
Average Time Frame of Trades: 1 Day - 1 Week

Sticking with my pick from yesterday, I'm looking to stay short EUR/JPY with a stop above 118.18, as the weekly candle remains below key trendline resistance.

Currency Analyst - David Rodriguez

My picks: Flat the JPY for now
Expertise: System Trading
Average Time Frame of Trades: 2-10 weeks

I remain a medium-term bull on the Japanese Yen, but we have clearly seen big pullbacks in the USD/JPY and I expect those to continue. As I've highlighted in the Quant Section of our new Forex Morning Slices report, forex options markets are clearly leaning towards further short-term USD/JPY pullbacks. As such, I will stick to the sidelines for now, waiting for the best moment to once again go short the pair. Realistically, I can see the USD/JPY challenge near the 95.00 mark before clear chance for a stronger pullback.

Currency Analyst - Ilya Spivak

My picks: Exit USDJPY Short
Expertise: Macro Fundamentals, Classic Technical Analysis
Average Time Frame of Trades: 1 week - 6 months

I originally sold USDJPY as the pair broke below a triangle formation and the swing low from late October. Price action has now managed to close above the upper boundary of a bearish channel that has guided prices lower since mid-July. This threatens the validity of the down trend and suggests the fundamentals are setting up to take over from trends in risk sentiment as the key driver for price action. This week’s dismal economic data may have been the breaking the point: Japan’s GDP shrank an annual rate of -12.7% in the fourth quarter, confirming the world’s second-largest economy is mired in the worst recession since the 1974 oil crisis. Exit the trade at market and shift to a neutral bias for the time being.

Currency Analyst - John Rivera

My picks:Long USD/JPY
Expertise: Fundamentals Combined With Technicals
Average Time Frame of Trades: 4-8 Days

Despite a severe bout of risk aversion in the market the USD/JPY rose as the correlation between the Yen and risk aversion has started to breakdown. Therefore, my short USD/JPY trade last week wasn’t profitable as I expected that the relationship would hold and the pair would continue fall further. The greenback has become the main beneficiary of safe-haven flows and that appears to be holding true even against the Yen. The BoJ is desperate to see its currency weakened and although it doesn’t appear intervention is the source of the current sell off, the recent momentum could inspire the central bank to take advantage. The 100-Day SMA at 94.00 will be my initial target with 97.44 the November 25th high as the next level of resistance.

Currency Analyst - David Song

My picks: Stay Short USD/JPY - Tighten Stops
Expertise: Fundamentals and Technicals
Average Time Frame of Trades: 2 - 10 Days

The USDJPY continued to push higher this week, bucking the dominant trend, and I will tighten my stops as a result to preserve my profits for the trade. I will place my stop at 93.00 (78.6% Fib), and if we see the pair break above this level to make a run for the 1/6 high of 94.6, I will stay out of the dollar-yen until we see further confirmation of where price action is headed over the near-term.

Currency Analyst - Joel S. Kruger

My picks: USD/JPY Long Triggered @92.80 for 94.60 Objective, Stop @91.90
Expertise: Technical Analysis
Average Time Frame of Trades: 1-3 Days

Price action in the major is starting to look more constructive after the latest round of setbacks off of the early January 2009 highs stalled out perfectly by 87.15, to match the previous trend lows from December. With weekly stochastics just having crossed up from oversold, there is plenty of room for gains to run over the coming weeks. The market had been trading below the daily Ichimoku cloud since mid-September but the current push higher is threatening this trend. The top of the cloud currently resides at 93.85 and a move back above will undoubtedly attract fresh bids. Another potential bullish formation that could be taking hold on the weekly chart is a textbook double bottom with neckline resistance by 94.60. A break back above the neckline at 94.60 would be significant as this pattern trigger would project additional upside back above 100.00 and towards the 104.00 area. In the interim, we will be looking to target a direct test of the 94.60 neckline at a minimum over the next 24-48 hours.

Fundamental Catalyst - The current broad based USD rally has started to even impact this pair with the market trading higher on Tuesday despite the increased risk aversion and concurrent sell-off in the Yen crosses. If the pair is rallying even during times of elevated uncertainty and in the face of falling global equity prices, surely there is good and compelling reason to be long. Additionally, any indication into the US session that the markets are once again willing to take on some risk should also benefit the USD in this pairing. It is also worth noting that technical, quant and flow related data all favor being long at current levels.



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