Summary:

• Japanese Yen rising across the board
• Risk-off flows see increased appetite for JPY as JAP225 hits 4-month low
•  USDJPY, EURJPY and GBPJPY all at interesting levels

A look across the FX space today reveals that the Japanese Yen is in vogue with the currency the best performer in G10 space. The JPY has gained 1% or more against the AUD, CAD and USD and even managed to edge higher by 0.5% against the next best performer which is the CHF.

 The JPY is enjoying a strong day of gains, trading higher across the board. Source: xStation

Given the turmoil seen in indices in recent weeks it is perhaps surprising that the JPY has been relatively subdued as the currency is often seen to gain in times of “risk-off”. Overnight the JAP225 made a break lower to trade at levels not seen since October and the market has now declined an incredible 4000+ ticks since posting its highest level since the early 90s just over 3 weeks ago. Price has now fallen to the 61.8% fib retracement (around 21025)of the rally that began in early September and this could be seen to be a crucial level going forward. 

 The JAP225 has declined sharply in recent weeks and sits at the 61.8% fib of the rally from the September low. Source: xStation

Looking at individual JPY pairs, the USDJPY, EURJPY and GBPJPY all sit at potentially very interesting levels. 

USDJPY

This market has today dropped to its lowest level since the beginning of September and should price break below 107.32 then you have to go all the way back to November 2016 to find a lower price. The pair began a strong move higher following Trump’s US election victory but more than half of these gains have since been handed back and given the previous significance of this level (from both a support and resistance perspective) a clean break below 107.32 could pave the way for a sustained decline. Alternatively if buyers can defend this level then a recovery back to 110.30 may occur. 

 The region from 107.32-108.48 is key support for this market and a break below could pave the way for a sustained decline. Source: xStation

EURJPY

Since the pair gapped strongly higher following the 1st round of the French elections last year there has been a strong uptrend intact as shown by an Ichimoku cloud on D1. However, price has recently declined to fall back below the cloud and should the accompanying lines also break lower then the trend could be seen to have turned lower. Given that the market rallied from the area around 115 to a high just below 140 in the space of 8 months there’s a lot of room below should a pullback occur.

 

 The EURJPY has broken below the Ichimoku cloud on D1 and could have broken the uptrend seen since last April’s French elections. Source: xStation

GBPJPY

This cross looks similar to the EURJPY one but is perhaps a few sessions behind. Price is on course to close below the D1 ichimoku cloud today for the 1st time in 5 months, but it should be noted that previous dips below the cloud last year failed to see a sustained move lower. Looking at just the past 6 months worth of trade the market broke decisively below a rising trendline last week and the price action surrounding a fairly hawkish BoE could signal further weakness lies ahead. The pair rallied strongly on the comments suggesting a faster pace of tightening may be appropriate but the market failed to hold onto these gains and ended the day with an inverted hammer. A double bottom around 148.92 may have formed in the short term but a break below here could see a larger move lower with 147 the next area to keep an eye on. 

 GBPJPY has broken a rising trendline and negative recent price action could be seen to signal further declines lie ahead. Source: xStation