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YEN running out of steam it seems

Market Analysis

EURJPY, Daily                 

The dollar and yen traded mostly softer against other currencies. EURUSD punched above yesterday’s high at 1.0740, with the euro logging a fresh three-week high at 1.0777, extending the run higher from last week’s one-month low at 1.0569. Cable lifted back above 1.2800, and USDJPY, pushed higher over 109.25 following the US Philly Fed (a touch lower than forecast) and weekly jobless numbers, (slightly higher than expectations) .

The yen softness was evident elsewhere and we took short positions against the EUR, CHF and GBP.

EURJPY A trade was entered yesterday (April 19) on the Daily chart looking for a continuation from the floor at around 115.00 that was formed on Monday.   The trade was opened at 116.80 yesterday with an initial target that was spiked to this morning at 117.50 for a 70 pip gain. Target 2 at 119.86 (the 200 day moving average and 61.8 Fibonacci level) is more ambitious and assuming the French Election presents no REAL surprises, is attainable in the medium term.

The EURJPY is probably the key currency pair with regard to the French Election. The safe haven appeal of the JPY appears to have waned as risk on seeps back into the market. Although the French election result appears very close, especially for the first round this weekend where all four candidates appear to hold about 20% of the polls each, the long game is the assumption that the young Centrist candidate (Macron) will be the next French President.  This should boost the EURO in general and in particular against the JPY where it has declined over 6% in the last four weeks.  The risk is if either Le Pen / and or Melenchon beat expectations in Sunday’s first round.

CHFJPY also exhibits a similar technical pattern to the EURJPY, a long position was entered at 109.25 (a breach of a the key 200 day moving average)   with target 1 at 109.96 (20 day moving average)  and target 2 at 110.73, 38.2 Fibonacci retracement  level of the recent down move to under 108.00.

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The more volatile, popular and liquid GBPJPY also prompted an entry today. A long position was entered on this morning’s energy at 139.68 with target 1 at the 14 DATR, top of the Bollinger band and round number of 141.00.  Target 2 is more ambitious, as the UK Election process rolls out and risk on returns during May as global geopolitical tensions ease. It is set at the February high of 142.50.

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Stuart Cowell

Senior Market Analyst

HotForex

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