khansalarehsan

YEN sell off expected after upbeat comments from Xi-Trump

Long
FX_IDC:USDJPY   U.S. Dollar / Japanese Yen

Yen has been consolidating for over 9 months. Perhaps the most boring currency in 2018. See the monthly YEN weighted average below.
This made trading YEN crosses difficult throughout the year. But see how on the weekly TF, for the first time it bounced into the EMA 14 and 21 last week and nicely pulled back.
This pullback caused by Powell comment that rates are just below the neutral. Cheaper USD led to stronger US Stocks and US stronger stocks means YEN sell off. With the 90 days ceasefire in trade war we should see a gap higher in US Stocks which is going to put more pressure on YEN and we may see eventually YEN breaks the 9 months support. On Daily TF YEN weighted average we have another 0.40% for YEN crosses to fall before heading into the last major support.
USDJPY also had 0.80% of upside move before heading into the neckline (major resistance) around 114.6
If the Neckline of the Inverted H&S breaks then we shall see 116.717 and 120 as major resistance.
The chart below show the correlation between the Inverted Nikkei (Red line) and weighted average YEN. See how they are positively correlated but for the last 2 years YEN is not falling with the same pace as Nikkei.
On the weekly TF see how Inverted Nikkei failed on the second attempt going higher after visiting the mid band. If it drops from here we shall see YEN falling too.
Below is YEN Yields and a negative correlation is expected. See how it is facing a major support here and a bounce is expected, hence a decline in YEN.
But to be honest USDJPY is not the most attractive YEN cross to trade. AUDJPY Long is great after the G20 summit. As Aussie may rise in the coming week and YEN may fall then this pair can offer a great opportunity to go Long.
See AUDJPY Monthly. It bounced in NOV off the mid band of the modified Pitchfork and although AUD crosses have risen over 5% in NOV but this pair underperformed by only moving 3.7%.
Weekly is even more attractive. See how it nicely bounced off the EMAs last week.
Best practical target in medium term is 86.11
Next interesting Long set up is NZDJPY . See how on the first week of AUG it made a false breakout of the wedge and stayed below the rising trend line for 13 weeks. Mad 4 attempts to go lower but it could not. Finally in the first week of NOV it got back inside the wedge formation and just last week it reached to the upper band of the wedge formation.
Question is that can we buy it right after the open and if so what SL or TP should be the best. Maybe that is not the best plan to buy it right at the open as it need 200-300 pips SL even though the TP is more attractive. I would wait until on D1 TF it hits 78.65 and then we can buy it back once it shows any sign of failure.
CADJPY looks a good long set up too but I am not convinced if CAD is the best candidate to be bullish on. When we have AUDJPY and NZDJPY and USDJPY , I would prefer not to trade CADJPY
CHFJPY is also a good long but I cannot find a good RR there. Target 114.63
The worst YEN crosses to be long I think is EURJPY considering the false breakout that it had on WED.
and GBPJPY considering that there is no good news coming out from the Brexit Deal.
But do not forget that GBPJPY can be the best Long trade if after 11 DEC a referendum happens. To read more about Sterling click below.
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Comments

Why would a Yen sell off be likely after the Xi-Trump agreement?
Reply
khansalarehsan Captain_Walker
@Captain_Walker, Stocks rising up mate hence YEN should fall... Negative correlation
Reply
Captain_Walker khansalarehsan
@khansalarehsan, And stocks may fall, in which case the opposite happens. I'm aware of the broad inverse relationship between Yen and US-stocks. The projection on the chart is to March 2019 for USDJPY on a weekly time frame. I'm not getting why the Yen would fall so much in relation to US-stocks, which would imply that US-stock markets would push north tremendously (though not identically to USDJPY). Mathematically, the USDJPY instrument is a pair of currencies - so the base currency (US-Dollar) matters. Even if the Yen falls crazily into March 2019, what happens if the US-Dollar falls crazily as well for that time scale? If that happens the ratio can remain in a range moving horizontally - is one possibility. I'm not saying that a break of USDJPY through 115 is not possible or that 120 cannot be a target. There is also the difficulty of the obvious band of weekly resistance which is visible at 114.397. What I am finding difficult is relying only on what the Yen does (in relation to US stock market performance) and for USDJPY projecting that far into March 2019 at approx 120. But I'm usually wrong 70% of the time. I make no prediction one way or the other - and I'm not saying the Yen won't fall.
Reply
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