USD/JPY poised for higher highs after pullback
James Chen, CMT December 21, 2016 1:52 PM
As always, much will depend on how the interest rate landscape plays out going forward. But as it currently stands, President-elect Donald Trump’s plans to stimulate growth and the Federal Reserve’s increasingly hawkish lean should serve to propel the dollar further.
As for the yen, the Bank of Japan remains on hold at negative interest rates with a massive stimulus program in place for the foreseeable future. This is coupled with the fact that financial markets – including both US and Japanese stocks – continue to surge to new highs, dramatically diminishing demand for safe-haven assets like gold and the yen. On the whole, not much of a reason currently exists for the yen to rally significantly in the near-term.
Of course, much could change as the still-unknown prospects for the new Trump Administration are gradually revealed. For the time being, however, the dollar remains the dominating force in global currencies while the yen continues to be the substantial laggard among its peers.
Against this backdrop, USD/JPY has undoubtedly made some spectacular gains since the US presidential election in early November. The currency pair’s sharp rise within the past two months has pared most of the losses made during the slide of the past year. This rally has been virtually unrelenting as the pair climbed rapidly to progressively higher multi-month highs. The latest culmination of this climb occurred last week when USD/JPY briefly reached above the key 118.00 level to hit a new ten-month high at 118.65. A modest pullback occurred early this week, but quickly recovered in the aftermath of the Bank of Japan’s policy statement. Now hovering under the key 118.00 level, USD/JPY could soon extend its surge to new heights, potentially approaching its January high. As long as the key 116.00 support level holds, any sustained re-break above 118.00 could boost USD/JPY towards its next major upside targets at the 120.00 psychological level followed by the noted 121.50-area January high.
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.