Jump to content

Japanese yen forecast: USD/JPY uptrend in focus as US braces for even higher inflation


Recommended Posts

Japanese yen may remain at risk to US Dollar despite Ukraine tensions; US inflation may continue surprising higher, keeping the Fed on the edge and USD/JPY faces an ascending triangle chart formation.

1646877098703.png
Source: Bloomberg
 
 

USD/JPY maintains its footing despite Russia’s attack on Ukraine, what’s next?

All things considered, the Japanese yen has not been holding up relatively well against the US dollar since Russia commenced its attack on Ukraine. Sure, you will find corners of the forex market where the anti-risk JPY absolutely crushed its major peers. These primarily include the Euro and British Pound. Meanwhile, the sentiment-linked Australian and New Zealand dollars soared against JPY.

EUR and GBP, which soared as tensions in Ukraine cooled in recent days, still remain vulnerable to escalation risk. AUD and NZD have been gaining despite their sensitivity to deteriorating risk appetite, likely due to rising commodity prices. In my eyes, this leaves yen crosses like EUR/JPY, GBP/JPY, AUD/JPY and NZD/JPY vulnerable to heightened volatility. USD/JPY could be a better defensive play.

On the 4-hour chart below, USD/JPY can be closely seen following the spread between United States and Japanese 10-year government bond yields. Both currencies tend to take on a ‘haven’ role in forex markets. As Russia invaded Ukraine, traders flocked to both fiat units. What gave, and still likely does, the Greenback an edge over the yen is a hawkish Federal Reserve.

Unfortunately for the central bank, the crisis in Ukraine is propping up commodity prices, especially oil, acting as a supply shock. This will likely boost inflation in the near-term, leaving the Federal Reserve in a tough spot. On Thursday, headline US CPI is expected to clock in at 7.9% y/y for February, up from 7.5% prior. A few firms are also predicting prices to rise 8%.

Despite tensions in Ukraine, the Fed is all set to raise benchmark lending rates next week, with quantitative tightening to likely follow soon. High inflation in the near-term may thus continue to favor the US dollar relative to the Japanese yen, especially if front-end Treasury yields remain elevated. The 2-year rate just closed at its highest since late 2019, clocking in at 1.66%.

USD/JPY versus US-Japan 10-year government bond yield spreads

USD/JPY versus US-Japan 10-year government bond yield spreads
Source: TradingView

USD/JPY technical analysis daily chart

On the daily chart, USD/JPY appears to be trading within the boundaries of an ascending triangle chart formation. The pair is approaching the ceiling of the triangle, which sits around 116.35. A breakout to the upside may open the door to uptrend resumption, exposing the 100% and 123.6% Fibonacci extensions at 117.29 and 118.19 respectively. Then the December 2016 peak at 118.66 will kick in.

In the event prices turn lower, the floor of the triangle, which is a rising trendline, may maintain an upside focus. Still, a breakout under the triangle could have bearish consequences. Such an outcome would place the focus on the current 2022 low at 113.47 before the 112.53 – 112.83 support zone kicks in.

1646876959199.png
Source: TradingView

This information has been prepared by DailyFX, the partner site of IG offering leading forex news and analysis. This information Advice given in this article is general in nature and is not intended to influence any person’s decisions about investing or financial products.

The material on this page does not contain a record of IG’s trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.

Daniel Dubrovsky | Currency Analyst, DailyFX, San Francisco
10 March 2022

Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • image.png

  • Posts

    • Corn Elliott wave analysis Function - Trend  Mode - Counter-Trend Structure - Expecting Impulse Wave  Position - Wave 2 Direction - Wave 3 Details - Wave 2 may not drop inside the 419-413 support zone where we expected it to end. Perhaps it has been completed with the surge to 438’4 and the subsequent corrective response. Wave 3 is probably in play and will be confirmed by the breach above 438’4. However, a double three corrective pattern into the zone is still likely. So we need an important impulse break upwards to confirm wave 2 has ended. Between 26 February and 13 March 2024, Corn gained over 12%. However, that’s merely a 17% recovery of the April 2022-to-February 2024 sell-off. Thus, there is still some way upside to go. From the Elliott wave perspective, it seems the current recovery will extend higher into the 22-month sell-off. By projection, the price might correct up to 571-623 Fibonacci retracement area. Today’s commodity blog post intends to show traders how to gain from this bullish corrective cycle. On the daily chart, from 824, we identified a corrective decline from April 2022 down to 394 in February 2024. Ideally, an impulse wave should follow to break above 824 in the long term. However, in this case, we will consider a 3-wave corrective bounce at first, and if the price supports, an impulse later. Currently, the price is in blue wave ‘A’ of blue wave ’1’ (both circled). We expect either to start with an impulse wave. On the H4 time frame, we can see the sub-waves of the current bounce better. On the H4 chart, a rally from 394 has completed the first impulse - wave 1. This is an indication that we may be right with the expected strong corrective rally or a long-term bullish impulse. From the end of wave 1, wave 2 has emerged and is quite debatable in the way it’s being structured. We expected wave 2 to end in the 419-413 key support zone. However, it appears wave 2 has ended with an expanding flat pattern. Flats can be quite tricky and can quickly transform a different pattern. Two ways to confirm wave 3 has started: 1. price breaks above blue wave ‘b’ of 2 high and  2. an impulsive break above 438 If the price confirms the end of wave 2, we should see wave 3 between 492 and 515 or maybe even higher. Thus, there’s more room to the upside for buyers to explore. However, if wave 3 is not confirmed, a further dip into the 419-423 or even lower shouldn’t come as a surprise. Technical Analyst : Sanmi Adeagbo Source : Tradinglounge.com get trial!    
    • Fears of a wider regional conflict in the Middle East weighed on market sentiment overnight, though a higher open is expected for the Dax. This flight to safety was triggered by news of an Iranian strike on Israel with hundreds of drones and missiles, raising concerns over potential Israeli retaliation. Safe-haven assets like gold and the US dollar strengthened, though the Japanese yen weakened to a 30-year low against the dollar, highlighting that interest rates remain the primary market focus despite geopolitical risks. Oil prices dipped in Asian trading as the risk of Iranian retaliation was already priced in last week. While the US has stated it will not take part in a counter-offensive against Iran, the volatility index remains near five-month highs, reflecting heightened market nervousness. Any further oil price increases could add to inflationary pressures, complicating central banks' efforts to control rising consumer prices. This week, markets will closely watch US economic data releases, including retail sales and comments from Federal Reserve officials, for clues on the monetary policy outlook amid persistent inflation concerns. The US earnings season is also underway, with mixed results from major banks getting the season off to a lacklustre start.  
    • TXN Elliott Wave Analysis Trading Lounge Daily Chart, Texas Instruments Inc., (TXN) Daily Chart TXN Elliott Wave Technical Analysis   FUNCTION: Trend MODE: Impulsive STRUCTURE: Motive POSITION:  Minor wave 3 DIRECTION: Upside in wave 3.     DETAILS: We are looking at either an extension in Minor wav 3 in the making, or else we are still in wave {b} of 2. The most bearish scenario is the one where the move off the 140$ bottom is not a wave 1 and we are still in a larger degree correction.       TXN Elliott Wave Analysis Trading Lounge 4Hr Chart, Texas Instruments Inc., (TXN) 4Hr Chart TXN Elliott Wave Technical Analysis   FUNCTION: Counter Trend MODE: Corrective STRUCTURE: Flat POSITION: Wave {ii}   DIRECTION: Bottom in wave (c) of {ii}. DETAILS: We are looking at a clear three wave move in wave {ii} with a bottom soon to be in place, looking for the beginning of MGM2 at 165$ to provide support.               Welcome to our TXN Elliott Wave Analysis Trading Lounge, where we delve into Texas Instruments Inc. (TXN) using Elliott Wave Technical Analysis. Let's dissect the market dynamics on both the Daily Chart and the 4H Chart as of April 15, 2024. * TXN Elliott Wave Technical Analysis – Daily Chart* On the Daily Chart, our analysis reveals a trending market characterized by impulsive mode and motive structure, positioned in Minor wave 3. The direction indicates upside momentum in wave 3. However, we are considering two potential scenarios: either an extension in Minor wave 3 or still within wave {b} of 2. The most bearish scenario suggests that the move from the $140 bottom may not be a wave 1, implying a larger degree correction. * TXN Elliott Wave Technical Analysis – 4hr Chart* Here, we observe a counter trend market marked by corrective mode and flat structure, positioned in Wave {ii}. The direction hints at a bottom forming in wave (c) of {ii}. Our analysis identifies a clear three-wave move in wave {ii}, with a bottom expected soon. We anticipate support to emerge around the beginning of MGM2 at $165.   Technical Analyst : Alessio Barretta   Source : Tradinglounge.com get trial here!  
×
×
  • Create New...
us