Yen Outlook for Next Week

Yen Outlook for Next Week

With talk of a trade war swirling, and volatility ticking up in equity markets, next week could be very eventual for Yen traders

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With volatility in global markets lurching up, and news flow delivering increasing levels of uncertainty, it could be an eventful and potentially bullish week broadly for the Japanese Yen.

Typically the Yen is thought of as a ‘safe haven’, which means when trouble hits capital markets traders flock to the perceived safety and stability of the Japanese Yen.

News this week has been dominated by talk of a looming trade war between the United States and China which could place a damper on global economic growth in the eyes of speculative traders. As both sides traded threats this week of retaliation for tarriffs being placed on their goods, global markets see-sawed back and forth trying to calibrate how serious the situation was and what might have been just talk compared to what could actually happen.

A reasonable expectation is for next week to produce multiple trading opportunities on Yen crosses given the potential for geo-political uncertainty.

Traders looking for additional insight and technical analysis on these pairs and other potential trades as we move through next week can click here 

 

Yen Cross Outlooks for Next Week:

 

USD/JPY

 

chart built by Jason Pfaff in TradingView

 

The Dollar Yen pair has drifted up this week back above the 107.00 level, after spending several weeks south of that mark.

Stretching back to last fall, this level was an area of support for the Yen as it spent time north of 110.0 in that prior range.

The current structure provides a topside trendline starting at the beginning of 2018 that represents a sharp downward move. The support trendline also represents lower lows stretching back to last May.

Our bias is for a bearish extension of the move that began at the start of 2018. Moving up to former support levels in the low 107’s could be a sign of a coming exhaustion after the brief up move. Combined with the fundamentals including major news flow risk, and we see elevated probabilities for a close below 105.50 at some point next week.

The primary risk to this outlook would be a sudden abatement in the speculation around an impending trade war between the US and China, or any other event that results in a stronger US dollar.

 

EUR/JPY

 

chart built by Jason Pfaff in TradingView

 

The Euro Yen pair is just below the 200 day moving average and is at a resistance level that had previously been carved out as a well defined area of support extending back to September of last year.

This pair was characterized by a steep sell off to open the year, but that move paused and we saw a sideways chop through March as the EUR/YEN cross searched for direction from the market.

Our bias is for a bounce lower off resistance that would continue the down move from earlier in the year and represent a sustained break below the 200 day moving average. This could result in a potential close below 130.0 at some point next week, which would certainly add energy and momentum to a potential further down move.

 

AUD/JPY

 

chart built by Jason Pfaff in TradingView

 

The Aussie dollar and Yen cross also produced a stark downward move through most of the first quarter, only to see a brief relief rally this past week.

With the pair in a pronounced narrowing downward channel and at resistance defined by the trendline stretching back to January, our bias is for a continuation of the descending move next week. The Australian Dollar is normally very correlated with global growth expectations, and if the trade war talk between the US and China continues to run hot, it would certainly impair any attempted upward move.

A trading plan for the week could consider several different positions in the Yen and there could be several opportunities to do this across multiple time frames with a Nadex spread to provide exposure to forex trading in a capped risk environment. If you haven’t already done so, get your free, permanent Nadex demo in under 30 seconds here: https://www.nadex.com/demo

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