USD/JPY 111.60 and the Battle to be King of the FX Safe Havens

At times like this, traders may want to shorten their time horizon and focus on key levels on shorter-term charts...

FOREX 9

With risk assets surging higher for the second straight day, two of the safe haven currencies are getting left in the dust. FX traders piled in to buy the US dollar and Japanese yen aggressively in recent weeks as they unwound carry trades and sought a safe place to store capital, but now that tide is going out (or at least the latest “wave” of the flow is receding). While the market’s broader risk appetite has interesting implications for various pairs, we wanted to focus in on a key level that may determine which safe haven currency is king in the days to come.

Looking at USD/JPY, rates have seen a violent round trip after peaking near 112.00 in late February, collapsing all the way to near 101.00 by early March, and then rising from the ashes to tack on over 1,000 pips to trade back in the mid-111.00s as of writing:

Source: TradingView, GAIN Capital

As the daily chart above shows, the massive drop and reversal has little historical precedent and has thrown the longer-term trend into question. At times like this, traders may want to shorten their time horizon and focus on key levels on shorter-term charts. As the hourly chart below shows, USD/JPY is forming a clear ascending triangle pattern on the hourly chart, with the pair testing established resistance at 111.60 while putting in progressively higher lows over the last four days:

Source: TradingView, GAIN Capital

Generally speaking, ascending triangle patterns indicate growing buying pressure that most often leads to a bullish breakout and continuation higher, though as we approach month- and quarter-end rebalancing after one of the most volatile months in recent memory, all FX pairs may see less predictable moves. Nonetheless, a break above 111.60 (ideally confirmed by a daily close above that area) would be a bullish sign that could reaffirm the US dollar as the “Safe Haven King” of the FX market. Meanwhile, a break lower from the current ascending triangle pattern could be the first step toward a swing back toward the yen being the most in-demand currency on the market’s next bout of risk aversion.


More from Forex

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.