Filed Under:
Forex pairs in this Article » USD/JPY (Athens) – The USD/JPY is trading upwards on Friday - while being under a slight pressure since the start of the European trading session – due to the fact that the Japanese currency is underperforming across the board as safe-haven demand fades away on hopes of a US budget deal.

USD/JPY soars on Nikkei and the extended short-covering ahead a long weekend

The USD/JPY continues to set up a very bullish shift trend after already having closed on a positive territory for a series of three days. Traders might find easily a couple of reasons for the bullish trend of the cross; first of all, as it widely known there is a heavy negative correlation between the Japanese currency and the Nikkei index, as it is more than plausible that when Nikkei is up the risk-sentiment is “on”, therefore the Japanese currency loses significantly its safe haven appeal. Therefore after today’s heavy gains of Nikkei (Nikkei closed up 1.48% at 14404.74), it was plausible that the Japanese currency would underperform, thus the cross would continue the uptrend shift. What’s more, looking behind the curtains a major reason on Friday’s Nikkei sharp gains could well attributed to the fact that Republicans offered to raise the debt ceiling for 6 weeks, thus “risk-on” sentiment stroke back. Thus, the Japanese currency lost its safe haven appeal and the greenback got a solid boost on easing worries on the US fiscal “woes”. Last but not least, a careful trader should realize that there were a lot of stops being hit in the areas as of 97.90-98.10 (due to the extended short-covering) and that is a major key driver regarding the cross continuation to its uptrend shift. Ahead of, there are also a lot of stop in the area as of 98.70-99.10, therefore if also being hit, the cross would probably move higher.

Technical Aspects on the USD/JPY

At the time of writing the cross is trading nearly 98.30 where the 50-daily MA lies, providing solid support. Furthermore, looking upwards we could see as a resistance the 98.60 area, where the 100-daily MA is being found. Earlier at the kick off of the Asian trading session the cross found itself nearly the 98.60 area but failed to touch, yet it printed fresh monthly highs (98.55). Karen Jones, Head Technical Analyst at Commerzbank mentions that “that the USD/JPY continues to see a strong rebound from its 200 day ma at 96.89. The market has eroded its short term resistance line and 55 day ma at 99.20 to reach the 50% retracement at 98.58. The move looks directional and while a challenge to the top of the recent range at 99.76/100.62 is plausible we look for this to hold - we neutralized our bullish outlook recently. Intraday dips will find minor support at 97.55 ahead of the 96.89 200 day ma. This guards the 95.70 5 month support line.”
comments powered by Disqus
Trading Center