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Is USD/JPY WATR-proof?

As you can see on the chart below, USD/JPY is having trouble extending its weekly gains above the 112.00 major psychological level.

Not exactly surprising, tbh. For one thing, the level lines up with a solid area of interest from late January to early March.

Not only that, but it’s also right at the top weekly ATR (WATR) that we marked last Monday!

The cherry on top is that it also lines up with a 38.2% Fibonacci retracement on the 1-hour chart.

And why don’t we add another cherry (it’s Friday after all) and point out that stochastic has juuust left the overbought territory. Now that’s a sweet treat for the bears!

USD/JPY 1-hour Forex Chart
USD/JPY 1-hour Forex Chart

I’m counting on trade protectionism talks to boost the yen against the dollar. Apparently, Trump is planning to sign executive orders that would limit Uncle Sam’s trade deficit against major partners like China and Japan.

And while Trump’s talks about targeting “currency manipulators” are mostly to throw shade at China, word around the forex grapevines is that the Donald could also include other countries such as South Korea and Japan in his currency-related attacks.

Still, I’m not too keen on entering a short trade until I see some downward momentum. For one thing, Japan’s not-so-impressive CPI and household spending reports released earlier give the BOJ more reasons to continue doling out monetary stimulus.

And then there are the relentlessly hawkish Fed members, who collectively hint that two more rate hikes is more than doable in 2017. In fact, the hawkish speeches we’ve seen throughout the week might have factored in the dollar’s recovery from the healthcare bill drama.

How about you? Do you think the dollar go back to losing pips against the yen soon? Or is it merely testing the resistance before shooting back up to March’s highs?

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