USD/JPY November 16th Analysis – “Unlimited Easing” Rhetoric – Extended JPY Downside
Our previous USD/JPY update (Wednesday) noted that the market was pricing in the potential for additional monetary easing measures in Japan, as Shinzo Abe, head of the LDP (Liberal Democratic Party) looked set to lead the next Japanese government. Abe, today called on the BoJ (Bank of Japan) to implement “unlimited easing measures” according to news reports. This has seen additional pressure on the JPY which has now experienced extended losses versus its major currency counterparts.
Our previous update likewise noted that if the 80.00 handle was taken by the dollar/yen bulls, the 80.60 area previous resistance area would become a key focus. This level also marks the 50% retrace of 84.17 > 77.12. The USD/JPY bulls have now taken out this level with a daily close printed at 81.16, a constructive technical development.
The corrective risk is for a reversion back under the former 80.60 area resistance highs, but momentum favours extended upside in the context of current market sentiment and political developments in Japan. NHK has reported that Japan’s PM Yoshihiko Noda is going to dissolve the Lower House of the Diet today (Friday 16th November).
Additional USD/JPY Technical Notes:
- Price has found interim resistance at the 61.8% Fibonacci retrace of dollar/yen 84.17 > 77.12, as can be seen on the daily time frame chart below (figure 1)
- USD/JPY finished Thursday +2.18% higher than the open after hitting a six-and-a-half month high. EUR/JPY ended the day with a 2.73% daily basis gain.
- If extended upside is to be seen in the near term the 80.60 area likely needs to hold as support. A sustained break back under this level could see a squeeze on recent USD/JPY longs.
- We will also be monitoring the EUR/JPY around the 105.00 handle if the current upside momentum continues. This is aligned with a 38.2% & 61.8% Fibonacci retrace level which provided significant resistance when last hit.
- The currency correlation chart below (figure 2) shows the JPY is significantly weaker than the other currency majors over recent trading sessions.
- See further USD/JPY analysis updates.
USDJPY – Daily Chart (figure 1)
Currency Majors – Relative Strength Correlation (figure 2)