How long before the daily USD/JPY turns over?

Friday, Apr 6, 2012

Earlier this week I looked at the AUD/JPY and described the turn over that we were expecting. This turn over had implications that were further reaching than just the aussie losing ground against a strong yen. Today I look at how the yen strength is outpacing the even the resurgent U.S. dollar.

The U.S. Dollar Index is still maintaining support above the 80.00 on today’s holiday-affected trading session. A flat session is no surprise. In fact for traders looking at buying into support, the longer-term intraday time frame has a swing buy zone waiting at between 80.05 and 79.83. Consider the 79.80 minor psychological level support as well and that pushes the range lower by three ticks, and makes it a 25 tick buy zone. If 80.00 does break, look for acceleration lower through 79.80 and remember that the daily time frame is still trading in a wide range and in that light, the area just above 80.00 could be a fade (short sell) area for dollar bears. With QE not out of the questions (especially with the risk appetite eroding from the market) the dollar may be under pressure

The sharp intraday drop (seen here on the daily EUR/JPY) on the 8:30am EST Non-Farm Payrolls release has set the tone for the next week where the mood on Monday is likely to carry on with the disappointment of the 120k actual versus the 207k forecast.

This is a significant miss (on a percentage basis) and while the Unemployment Rate checked in one-tenth of a percent lower-then-expected, but it’s not enough to take the sting off a 87k miss on NFP. Ouch.

This all will make a stronger case of the USD/JPY to roll over. Sure the AUD/JPY rollover may be easy to dismiss as a weak aussie dollar, but the rollover confirmed in yesterday’s EUR/JPY has now put two of the three yen pairs below their respective 34 period EMA low and 50 period SMA closes.

With the yen gaining on the aussie and now euro, the dollar seems to be next in line as the daily chart sits perilously on the 50 period SMA close (50DMA), the pair has already crossed through the 34EMA Wave with a -100 CCI (Commodity Channel Index, 20 period) reading.

This is triggered a Wave Reversal or Wave/CCI short sell as prices traded lower through 81.58 and while I like this entry, I would much rather see the 81.50 major psychological level break as well and see acceleration through it to confirm the shift in the market trend. Since this is also the first red GRaB candle, there’s been little time to observe any kind of sentiment and momentum shift; another reason I would like to see the bears push the pair lower through the “50” pip.

The daily USD/JPY remains the only yen pair I watch to not have completed a breakdown through the 34EMA Wave and 50 period SMA close. While the Wave Reversal has triggered and confirmed, a break of the 81.50 level would go a long way in showing me that the bears are in control here.

 


By the way, I had a pleasure of having lunch with author Charlie Wright yesterday and one of the best things he said (amongst many during a great lunch) is “Use conventional indicators in unconventional ways.” More on that next week!


 

Past performance is not indicative of future results 

As an active forex trader and Chief Currency Analyst for InterbankFX.com I do write for a number of sites all over the web and I am happy to say that I will be posting updates at www.IBFXconnect.com. My Activity Board will feature the trades from my trading account as well as intraday commentary.

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Posted By: 

Raghee Horner

Raghee Horner, chief currency analyst for IBFX, provides her personal daily trading tips and insights through Dailyforextradingedge.com. An experienced trader with over fifteen years in the markets, Raghee is the co-founder of EZ2Trade Software and has taught her brand of technical analysis and charting strategies to students all over the world. She is an international author and has taught currencies, futures, and equities trading for over a decade.