CFDs are complex financial instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. CFDs are complex financial instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

USD/JPY – look out below

USD/JPY has reached a vital level, with major consequences if it continues to fall.

Chris Beauchamp ChrisB_IG
Chief Market Analyst, London

Publication date : 2018-03-22T15:00:38+0000

USD/JPY

Source: Bloomberg

When a central bank hikes interest rates and the currency fails to rally, you know there is something amiss.

Jerome Powell’s first press conference went off without a hitch, indeed the new Federal Reserve (Fed) boss rattled through the press conference, dispatching questions with little of the monetary policy exegesis that characterised his predecessor. But the dollar’s bounce was short-lived against the yen, and we have arrived at a key level for USD/JPY.

At present, it looks like the committee is not keen to hike more than twice this year. This could change; given that the makeup of the committee will develop over the year, more hawkish voters will come on stream, with the possibility that it will be viewed as a ‘four-hike’ year by June 2018 . USD/JPY traders were clearly disappointed that they didn’t get a more hawkish view from Mr. Powell.

All this comes at a crucial point for USD/JPY. We are at a ‘look out below’ moment, or to use another term, ‘bounce or bust’. The pair has been in a steady downtrend since the first half of 2015, and the September-November 2017 rally was simply a counter-trend move. Now, the price has fallen to its lowest level since October 2016.

The crucial level to watch is ¥105.24. This was the low at the beginning of March, and when it was last hit a short-term bounce developed. However, the recovery was swiftly beaten back. If ¥105.24 is lost, then the pair faces a trap-door that could send it to at least ¥101.19, the next big support level. Below this, ¥100.08 comes into play, and then ¥98.98.

The hope for the bulls is that the weekly chart is now heavily oversold, and that a bounce will materialise. However, any bounce that fails to move above ¥107.31 is still a probable selling opportunity, and even a surge to ¥112.00 would still be constrained by the post-2015 downward trend. This pair bears close watching in the coming days.

USD/JPY price chart

USD/JPY price chart

This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.

Find articles by writer

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. Professional Clients can lose more than they deposit.

The value of shares and ETFs bought through an IG stock trading account can fall as well as rise, which could mean getting back less than you originally put in. Please ensure you fully understand the risks and take care to manage your exposure.

IG does not issue advice, recommendations or opinions in relation to acquiring, holding or disposing of a CFD. IG is not a financial advisor and all services are provided on an execution-only basis. This communication is not an offer or solicitation to enter into a transaction and shall not be construed as such.

IG is a trading name of IG Limited a company registered at 2702 & 2703 Level 27, Tower 2, Al Fattan Currency House, DIFC, Dubai, United Arab Emirates. IG is authorised and regulated by the Dubai Financial Services Authority (DFSA) under reference No. F001780.

The information on this site is not directed at residents of the United States, Belgium or any particular country outside the UAE and is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.