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Tactics and Analysis, June 29, 2017 – Yen’s Interesting Terrain

By:
Yaron Mazor
Published: Jun 29, 2017, 10:30 UTC

The Yen continues to show signs of weakness against the U.S Dollar in the short-term. The Yen has been a rather tight range the past week, but has

USD/JPY Analysis

The Yen continues to show signs of weakness against the U.S Dollar in the short-term. The Yen has been a rather tight range the past week, but has incrementally seen the U.S Dollar bought against the Japanese currency. Official monetary policy from Japan continues to create opportunity for traders who believe the Yen will weaken.

Yen Attracting Attention

The U.S Dollar has continued to be bought against the Yen in the short-term.

The Yen has weakened the past two days against the U.S Dollar as risk appetite continues to be seen in Asian equities, and on the heels of strong central bank rhetoric about an improving global economy. The 112.00 ratio appears to have become an interesting support level.

USD/JPY 1H Chart
USD/JPY 1H Chart

Plenty of important data will come from Japan early on Friday via Household Spending, inflation results and a Manufacturing Purchasing Managers Index. If the results prove lackluster tomorrow, the Yen may see additional speculative forces create volatility.

More Weakness to Come?

The U.S Dollar has been bought steadily against the Yen over the mid-term. Yes, there has certainly been volatility, but since the beginning of June the Yen has been retracing weakness displayed in early May, and traders appear to have set their sights on resistance levels around the 113.00 juncture.

USD/JPY 4H Chart
USD/JPY 4H Chart

The Nikkei and Topix Indexes have continued to see strong buying today. And over the past month Japanese equities have achieved solid gains. If risk appetite continues to be sustained in the Asian stock markets, the U.S Dollar may continue to be bought against the Yen.

Bank of Japan Differentials

A look at a long-term chart of the U.S Dollar and Yen shows the Japanese currency’s weakness since late October of 2016.

A significant factor for some investors when considering a buy of the U.S Dollar against the Yen, is the large differential in interest rates which has developed between the U.S Federal Reserve and the Bank of Japan.

USD/JPY Daily Chart
USD/JPY Daily Chart

It may take a considerable amount of time before the Bank of Japan will be able to increase their interest rate, in a manner which will be competitive with other central banks. And on top of that notion, exists the fact – the government of Japan’s official stance is to maintain the Yen’s weakness in order to spark its economy via exports.

In the short term, we believe the Yen may be negative. In the mid-term and long-term we are unbiased.

Yaron Mazor is a senior analyst at SuperTraderTV.

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About the Author

Yaron Mazorcontributor

Yaron has been involved with the capital markets since 1998. During the past 16 years, Yaron has been a day and swing stocks trader in the American market. Yaron has founded and made successful investments into businesses spanning exciting industries – from apparel to restaurants and bars, to high tech, medical technology, and education.

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