Yen weakens as “risk on” theme resumes (USDJPY Forecast)

  • Hopes of a COVID-19 vaccine, alongside positive progress by France and Germany with respect to a European recovery fund have seen global financial markets shift back towards a “risk on” theme this week.
  • Global stock averages have surged back higher to reject prior negative signals from mid-May, see our report here from Tuesday.
  • In the Forex markets, most currencies, particularly the “risk currencies” (Australian, New Zealand and Canadian Dollars), have all rallied versus the US Dollar.
  • But in turn, the US Dollar has pushed higher versus the Japanese Yen, with the Yen the weak currency as is usual in a “risk on” phase. Here we spotlight USDJPY

USDJPY day trade outlook: Threat up through key 108.17

A firm advance on Tuesday above 107.50 and 107.77 barriers to stop exactly at the top of our 108.04/08 resistance area, after a tentative probe higher Monday, to retain the positive tone from the firm mid-May rally (to 107.77), to keep the risk higher Wednesday.

·      We see an upside bias for 108.08, then key 108.17; a break above here aims for 108.59 and maybe even towards 109.10, possibly key 109.38.

·      But below 107.31 targets 106.71, maybe even towards 106.24.

USDJPY intermediate-term outlook

The late April selloff up through 106.89 signalled an intermediate-term shift to a bear trend.

  • Downside threat: We see an intermediate-term bear trend to aim for 105.12 and 103.04, maybe 101.16.
  • What changes this? Above 108.17 shift the intermediate-term bear trend to neutral and only through 109.38 to bullish.

4 Hour USDJPY Chart

USDJPY chart

Editor in chief

Steve Miley has 29 years of financial market experience and as a seasoned expert now has many responsibilities. He is the founder, Director and Primary Analyst at The Market Chartist, the Editor-in...continued

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