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Japanese Yen Looks to Consolidate Against the US Dollar After Making New Lows. Can USD/JPY Go Higher?


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JAPANESE YEN, USD/JPY, US DOLLAR, US TREASURIES, HANG SENG, FED - TALKING POINTS:

  • The Japanese Yen is caught between bullish momentum and resistance levels.
  • APAC equity indices mostly moveslightly higher except for the Hang Seng Index.
  • The US Dollar has gyrated to Treasury yield swings, will that drive USD/JPY?
How to Trade USD/JPY

The Japanese Yen had little reaction to national CPI data released today. Headline CPI was a slight miss at 0.1% year on year against 0.2% forecast while core CPI hit expectations at 0.1% year on year.

Currencies were generally quiet through the Asian session after the US Dollar came under pressure overnight. EUR/USD recovered from Wednesday’s low of the year and is trading near 1.1350. EUR/CHF hit a six-year low at 1.04985.

US Treasury yields across the curve have been trying to edge up, but all are mostly back to where they were on the US close. US 2-year is near 0.50 % and the 10-year around 1.60%.

Crude oil continues to recover from Wednesday’s rout while there’s still no official confirmation that the US will tap their Strategic Petroleum Reserve.

Gold remains in a 1850 – 1877 range after a solid move higher earlier in the month. Iron ore prices have remained in an unusually narrow range this week.

APAC equities had little to go from the US session, but Hong Kong’s Hang Seng index took a beating as tech stocks weakened on Alibaba’s earnings miss. Australian, Japanese, Korean and Chinese mainland bourses were all in the green.

In the background, the President’s nominee for the next Federal Reserve Governor position is being watched. The race is between the incumbent, Jerome Powell and Lael Brainard. The latter is considered more dovish by the markets.

Looking ahead, there is very little data due out in the North America, but Joe Biden’s massive stimulus plan is due to go to a vote in the House. There are also a couple of Fed speakers, Clarida and Daly, due to talk.

 

USD/JPY TECHNICAL ANALYSIS

USD/JPY made a 4-year high earlier this week but was unable to follow through.

This has created a series of potential resistance levels. The pivot points at 114.45, 114.701, and 114.735 lie ahead of the peak at 114.971.

On the downside, there are possible support levels at the recent lows of 113.762 and 112.727. Sitting just above 113.762 are the short-term 10 and 21-day simple moving averages (SMA).

These short-term SMAs share a positive gradient with the medium and long-term SMAs as illustrated by the 55 and 200-day SMAs. This could suggest that bullish momentum remains.

USD/JPY CHART

Chart created in TradingView

 

Written by Daniel McCarthy, Strategist for DailyFX.com. 19th November 2021

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