steve.jarvis's picture

And this week's new number one is the Japanese Yen

I’ve said it before (see 12 September blog), but it’s amazing how fast a Currency’s fortunes can change!   I previously drew attention to the speed of the deterioration of Sterling and then the Australian Dollar.  Now the opposite can be said about the Japanese Yen.  In the space of 3 weeks it has gone from being the weakest of all the major ten Currencies we most closely follow to the strongest!  The question is, for how long?

With the exception of USD/JPY, the Japanese Yen has now moved above it's 260 day (1 year) moving average against all of the other 10 major Currencies we most closely follow.  In many cases, that trend-line is still pointed downwards for the Yen, suggesting the trend may not have changed for good, but over the short-term at least the Yen shows no immediate signs of forming a top and looks set for a continued advance.

I'm not going to show all nine of the Yen charts here, just a few which look particularly interesting at the current time. 

The most bullish looking chart for the Yen is arguably NZD/JPY, which completed a medium-term head & shoulders top 2 weeks ago and has continued to develop in bearish fashion since then.  It is approaching the 83.00-83.50 area where a bounce may emerge, but this is favoured to be corrective in nature, possibly limited to the 86.50-87.50 area before leaving a key lower top for further losses over coming weeks in the direction of 81.50, around February's low.

Click on the NZD/JPY chart (left) to see a larger image 

 

SEK/JPY is also particularly bearish, with the recent recovery from a 2 month base around 14.70-14.80 having been reversed from 15.40-15.45, just under the slightly falling 260 day (1 year) moving average in mid September.  There has already been a break to new lows and further losses (that's SEK weakness / JPY strength) in the direction of 14.35 & 14.00 may occur over coming weeks & months.  We would expect a short-term bounce to now leave a lower top at a maximum of 15.20-15.25 and ideally by 15.05-15.10.

Click on the SEK/JPY chart (left) to see a larger image 

 

As mentioned, USD/JPY is one chart where Yen strength currently looks corrective, retracing part of the significant August-September advance.  So while the USD/JPY retreat from just over 110 may initially persist, a key higher low may develop by 104.25-104.75 and set up a fresh advance.  The speed & extent of that improvement will be important and watched with interest given the structure of the other Yen charts.  While we do not rule out USD/JPY taking out 110 and heading towards 111.50 & 112.50, the risk is for a sub 110 lower top to develop, triggering a more significant multi-month decline.  

Click on the USD/JPY chart (left) to see a larger image