USDJPY News and Talking Points
– USDJPY gets a political bid as the US ramps up action against China and the EU.
– Recent uptrend breaks as technical indicators collide.
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USDJPY – Fundamental and Technical Boost for the Japanese Yen
USDJPY looks set to weaken further as political risk takes the shine of the US dollar on increased trade war fears. Over the weekend US President Trump said that if the EU does not remove trade barriers and tariffs placed on US products then it would place a 20% tariff on all EU cars entering the US, an action that would hit Germany hard. Trump later tweeted that if trade barriers are not removed, more ‘reciprocity’ would be on the way. The US is also looking to restrict Chinese investments in ‘sensitive’ US industries under an act that allows these investments to be deemed a threat to national security.
USDJPY gained a strong bid on the back of the latest escalation and broke back below 110 as the Yen became the favoured safe-haven. The chart shows a cluster of indicators around the 110 level with USDJPY now trading below the 20-, 50- and 200-day moving average while the pair also trade below the uptrend line started at the end of March. USDJPY is also trading just below the 50% Fibonacci retracement level at 109.685 and now eyes the next support level at 108.493. On the upside the cluster of moving averages should offer initial resistance ahead of 110.877.
The latest IG Client Sentiment Indicator shows retail are 47.9% long USDJPY and recent positional changes give us a stronger bullish contrarian trading bias.
USDJPYDaily Price Chart (January 2017 – June 25, 2018)
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— Written by Nick Cawley, Analyst