Nikkei's Break To New Highs Puts USD/JPY On The Radar
Matt Simpson April 14, 2019 11:34 PM
Renewed trade optimism and strong earnings saw Asian shares break higher. With Nikkei 25 breaking a new cycle high, we're closely watching USD/JPY to see if it follows suit.
Renewed trade optimism and strong earnings from the US on Friday has seen Asia shares break broadly higher today, with the Nikkei 225 trading at its highest level since early December. We can see on the Nikkei 225 futures market that the trend structure is increasingly bullish, and today’s range expansion shows the index accelerating away from its 200-day average. Ultimately, the trend remains bullish above the 21,540 low but over the near-term we’d like to see prices hold above the 21,876-21,970 highs, before targeting the December high around 22,700. With the Nikkei having broken a cycle high, we’re closely watching to see if USD/JPY follows suit.
On the daily chart we can see that USD/JPY has stalled near the March high and is pondering a break higher. A morning star reversal pattern helped the pair bounce back above the 200-day eMA and has seemingly formed the ‘right shoulder’ (RS) of a potential inverted head and shoulders pattern. If successful, the pattern projects an initial target just above 114. Furthermore, the short-term averages are fanning out to show a pick-up of bullish momentum. Whilst Friday’s could be used to confirm the inverted head and shoulders pattern, we’d prefer to use a break above December’s low (112.24) to confirm a breakout which bring 113 (round number) and the 113.70 highs into focus as potential, bullish targets.
As noted in this week’s COT report, JPY traders are their most bearish on the yen since late December, with short interesting continuing to pick up whilst long interest trend lower. Yen futures have remained elevated, so perhaps its time to close the gap and break lower (which would be bullish for USD/JPY) and follow the Nekkei and AUD/JPY's bullish break.
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.