DXY below 99.88. What does that mean for USD/JPY?
Joe Perry April 28, 2020 2:55 PM
If DXY breaks lower below the symmetrical triangle, it could bring USD/JPY much lower with it!
When the Coronavirus first began to spread throughout the world, the US Dollar Index (DXY) began to trade violently. First it traded down to 94.50 as the Fed began throwing money at everyone on the street to help with the economic effects from the pandemic. In addition, people feared a slowdown in the US. The DXY then traded higher to 102.99 as the Index became a flight to safety. It then pulled back to 50% of that move on March 27th, and has been trading in a well-defined, tight range between 98.27 and 100.93 for the last month. It is currently forming a symmetrical triangle. Price had been holding above horizontal support at 99.62, and finally broke below today. It has bounced back to resistance at 99.88. Above there, resistance is back at the day’s highs of 100.21 and then near the downward sloping trendline from the triangle near 100.45. Initial support is at the day’s lows of 99.45 and then near the upward sloping trendline from the triangle near 99.35.
Source: Tradingview, FOREX.com
If traders believe that horizontal resistance at 99.88 will hold in the DXY, one way to take advantage of this is to short the USD/JPY. Notice on a 240-minute timeframe how many times the USD/JPY has acted as both support and resistance. Today, the pair finally broke back below the 107.00 level to a low of 106.56 and bounced back up to 107.00 and held. There is support at the 50% retracement level from the lows of March 20th to the highs of March 24th near 106.45. However, if it does break lower from there, USD/JPY can fall all the was to 105.20, which is the 61.8% retracement level over that same time period.
Source: Tradingview, FOREX.com
If traders are looking for the DXY to move lower, the USD/JPY may be a good way to take advantage of it. And if DXY breaks lower below the symmetrical triangle, it could bring USD/JPY much lower with it!
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.