CAD/JPY Breakout Above the Pattern

CAD/JPY Technical Analysis

  • Buying the dips
  • Bullish trend
  • M H5 is the next target
  • MA angle is sharp

MEGATREND MAs: Bullish

Daily CAD/JPY

  1. Point 1
  2. Point 2
  3. Point 3
  4. Target zone

The CAD/JPY is undergoing a strong trend. The trend is bullish and I expect the market to push further up. At this point MEGATREND is showing a good potential for continuation of a long trend with new entries shown in the chart. Additionally, the Bank of Japan presented the summary of the June meeting, not adding a real lot to what we already knew from this unchanged policy meeting.

Board members did express concern about a sharply falling yen though. But they still do nothing about it and we see that there is no intervention in the open market yet. There is no strong data for the JPY this week but we will see mr.Powell speaking in the next few days so it might add also to Yen volatility. Equities will also move along with the Yen.

This analysis is a part of the Megatrend trading course. I have 2 long positions that I will maintain. The intraday target is 105.67 while the intraweek target is 106.05. There is no swing target yet as first we need to see M H5 taken away and only then we will see the continuation of a trade as a swing position.

Cheers and safe trading,

Nenad

CAD/JPY Bearish Rejection Pinbars

CAD/JPY Technical Analysis

  • Multiple Pinbars
  • The price is bearish
  • Lower highs
  • W L4 possible target

MEGATREND MAs: Bearish

H4 Chart CAD/JPY

  1. Left shoulder
  2. Head
  3. Right shoulder
  4. Target

The CAD/JPY is showing pinbar rejections off the W H3 resistance. The earthquake in Japan and China lockdown loosening policy turned Yen weak overnight. However as the price is still bearish we should see a move down. Megatrend MAs are bearish. Multiple pinbars confirm sellers. The entry in the zone 99.85-100.00 has been made. Possible targets are 99.30 followed by 99.02 and 98.46 as the final target.

For a look at all of today’s economic events, check out our economic calendar.

Cheers and safe trading,

Nenad

Trade of the Week: Bank of Canada Rate Hike May Boost Canadian Dollar

Notice how the CAD has a year-to-date climb versus most of its G10 peers, except for safe haven currencies such as the Japanese Yen and the Swiss Franc.

Go further back to the end of 2020 and you’ll also find that the CAD is the sole G10 currency that has advanced against the greenback since.

Why has CAD been outperforming?

1. Oil’s surge

Canada is the world’s fourth-largest oil producer and has the world’s third-largest crude reserves. The oil and gas sector accounts for about 5% of the economy, with the commodity being Canada’s largest export.

In short, Canada is reliant on oil. Hence, oil prices have a major impact on the loonie.

Considering oil’s rip-roaring 13% surge so far in 2022 (adding to last year’s 50% climb) that has helped boost CAD’s allure

2. Higher yields

Yields are the calculation of earnings from an investment. And Canadian bonds are now offering higher yields than their counterparts in the US, Europe, and Japan. These higher yields suggest that investors would be more inclined to park their money in Canadian assets over those in other developed markets.

Such heightened demand also implies greater demand for the Canadian dollar, which in turn is offering support for the loonie.

3. Hawkish BoC outlook

Markets are giving a 72% chance that the Bank of Canada will raise interest rates on January 27th, which would mark its first since the pandemic. Inflation in December hit 4.8% which was its highest reading since 1991. Raising interest rates is a primary way that a central bank can help subdue consumer prices.

Note that markets are also forecasting six rate hikes by the BoC before 2022 is over. That is more than the Fed and the Bank of England, who are both expected to hike 4 times respectively this year.

Overall, such ‘hawkish’ expectations have been fueling CAD’s strength in recent months, while also offering the rationale for those higher yields mentioned earlier.

However, not everyone agrees that a BoC hike this week is a foregone conclusion.

Two-thirds of economists surveyed by Bloomberg think that the Bank of Canada’s Overnight Lending Rate will remain at 0.25% this month. In fact, last Tuesday, markets had priced in an 82% chance of a January rate hike, only to pare back such bets down to 72% at the time of writing (hence the recent recovery in USDCAD).

USD/CAD daily chart

In short, the BoC has to deliver on a hike this week to give USDCAD a chance of revisiting its 200-day simple moving average (SMA) as a key support level. That support region is also strengthened by the presence of the currency pair’s 50% Fibonacci retracement level from its June-December 2021 advance.

However, if the BoC disappoints some segments of the markets and keeps rates lower for a while more, that could see USDCAD testing its 50-day SMA for immediate resistance, with stronger resistance set to arrive around the 23.6% retracement line.

BoC vs. ECB to keep EURCAD’s downtrend intact

Compared against the likes of the European Central Bank, which remains far from raising its own interest rates, the BoC appears to be much further ahead in the path towards restoring policy settings to pre-pandemic levels

This diverging outlook has been a key driver of EURCAD’s downtrend over the course of 2021, aided further by the stellar gains in oil prices.

The unwinding of hawkish BoC bets has translated into a slight pullback for EURCAD in recent sessions, even as the pair recovers from oversold conditions after having broken below its lower Bollinger band and touching its lowest levels since April 2017.

Still, EURCAD is not expected to see significant gains in the weeks and months ahead, barring a dovish surprise out of the Bank of Canada this week.

EUR/CAD daily chart

As long as hawkish BoC expectations remain intact, depending on the mid-week meeting’s outcome, and with oil prices set to explore further upside, then the Canadian dollar could still see more gains against most of its G10 peers in the near future.

By Han Tan Chief Market Analyst at Exinity Group

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

EUR/JPY and CAD/JPY Currency Pairs Elliott Wave Cycles Point Downside

However, after recent bounce seems like EURJPY is forming a bearish triangle pattern, so we may see a sideways consolidation, but still be aware of a bearish continuation for the final wave 5 of C) before it finds the support.

EUR/JPY 4h Elliott Wave Analysis

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CADJPY is turning sharply down from the highs on a daily chart, which suggests that a five-wave cycle is completed. So, we are now tracking a three-wave A-B-C correction that can send the price at least back to 38,2% Fibonacci retracement and to the former wave 4 support. Currently seems to be wave B still in progress and once it’s fully finished, be aware of another wave C decline.

CAD/JPY Daily Elliott Wave Analysis

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Pair With Yen Are Slowly Terminating the Correction

Indices are experiencing a small bearish correction close to the all-time or in some cases – long-term highs.

EURUSD is coming back to the major, long-term downtrend after the price bounced off the 38,2% Fibonacci.

USDJPY is balancing on a mid-term horizontal support. Sentiment is of course still positive.

NZDUSD for the past few days has been moving sideways, big signal probably coming soon!

CADJPY is inside of a flag pattern waiting for another ride north.

Pretty much the same is happening on the GBPJPY.

Now let’s move on to metals:

Silver is in the process of creating the right shoulder of the iH&S formation, which can start a proper bullish trend here.

Gold is still locked between crucial Fibonacci lines. We need to see a breakout first before we are going to see any major swings.

Platinum creates another trend continuation pattern, which, with a false breakout to the upside, can give us a proper sell signal.

For a look at all of today’s economic events, check out our economic calendar.

Yen Finishes The Correction and Is Ready for Further Weakening

Indices extend gains and the party on the stock market goes on.

EURUSD is bouncing off the 38,2% Fibonacci and is coming to the downtrend.

GBPUSD, on the other hand, is in positive territory, still trading above the major mid-term down trendline.

Seems that USDJPY is ending the bearish correction, as the price is breaking the upper line of the wedge and is aiming higher.

The same applies to CADJPY, GBPJPY and the majority of pairs with JPY in them.

USDCAD advances higher after a triple bottom formation but the rise is shy and most probably, will end soon.

NZDUSD is holding above the major horizontal support, keeping the buy signal alive.

Silver with a chance for a major inverse head and shoulders pattern. But we are in the early stages, still waiting for the right shoulder.

Gold is still in no mans land, waiting for a breakout.

For a look at all of today’s economic events, check out our economic calendar.

GBP and FTSE Flex Muscles

Dax climbs higher after the false breakout and the inverse head and shoulders pattern.

SP500 is very close to breaking the upper line of the wedge pattern, which would effectively end the bearish correction.

FTSE already broke its own dynamic resistance and climbs higher with a proper buy signal.

EURUSD goes up with a mission to test two crucial horizontal resistances.

GBPUSD is in a better situation. Here we have only one dynamic resistance, which we’re testing as we speak.

USDCAD collapses lower with high momentum.

NZDUSD goes up aiming for the upper line of the flag pattern.

CADJPY continues the way up.

The same story with the GBPJPY.

Silver made a significant breakout of a combination of a crucial horizontal and dynamic resistances, that is bullish.

For a look at all of today’s economic events, check out our economic calendar.

Yen Keeps Crushing

Seems like DAX eventually defends the 15000 support and aims higher towards the mid-term dynamic resistance.

FTSE looks very strong as buyers are currently attacking their own dynamic mid-term resistance.

GBPUSD is also doing pretty good. We’re still above the 23,6% Fibonacci with big chances for an upswing supported by the false breakout pattern from the beginning of October.

USDJPY continues with a big bullish momentum.

CADJPY is doing the same. Price is not stopping and fighting for the 5th bullish day in a row.

The same goes for the GBPJPY, you can see those kinds of movements pretty much everywhere on the pairs with the JPY.

Silver is defending the 22.2 USD/oz support and it looks like this area should not be bothered anymore in the next few days.

For a look at all of today’s economic events, check out our economic calendar.

Yen Suffers on Monday

American and European indices started the new week with small drops although Asia had a rather successful session.

The EURUSD started with a small rise but it seems more like a dead cat bounce. I don’t see a chance for it to develop into something bigger.

A better situation can be spotted with the GBPUSD, where price action suggests the that the false breakout is in place, which would point to a further appreciation of the Sterling.

The USDJPY broke the upper line of the channel up formation, showing us a pure dominance by buyers.

The CADJPY also climbed higher fulfilling expectations from the inverse head and shoulders pattern.

The GBPJPY finally broke from the sideways trend, as you may have expected; to the upside. That brings us a long-term buy signal.

For a look at all of today’s economic events, check out our economic calendar.

USD Gains Accelerate

The SP500 created a small flag, which is probably a stop before an attack on the neckline of the Head and Shoulders formation.

The Nasdaq escaped from the wedge to the downside. The Head and Shoulders formation is in play here too.

The EURUSD broke a major horizontal support and is aiming lower.

The GBPUSD is in pretty much the same situation.

The USDJPY is climbing higher and it all started with a bullish breakout from the symmetric triangle pattern.

The CADJPY created a small pennant in the mid-term. A breakout will show us the direction.

The GBPJPY is also waiting for a breakout.

The USDMXN already had one. This time, to the upside. Sentiment is definitely positive.

We end with Silver, which also broken an important level, but in this case, it’s a crucial horizontal support. The next few days and weeks can be tough.

For a look at all of today’s economic events, check out our economic calendar.

EUR/USD, Cable and Silver Bounce From Crucial Horizontal Supports

SP500 opens higher but Asian and European sessions bring only sour disappointment.

Dax is doing slightly better but we’re still below a major mid-term down trendline.

Nasdaq is breaking the lower line of the wedge, which is actually pretty negative.

GBPUSD is defending crucial long-term horizontal support.

USDJPY continues the upswing after the price broke the upper line of the symmetric triangle pattern.

AUDCHF is trying to create the right shoulder of the iH&S formation.

CADJPY is with a proper buy signal, after the price breaks the neckline and the mid-term down trendline.

GBPJPY is very close to a buy signal as the price is currently breaking the dynamic resistance as we speak.

USDMXN is very close to a major trading signal as we are almost at the end of the symmetric triangle pattern.

Silver is trying to create a double bottom formation on a crucial horizontal support.

For a look at all of today’s economic events, check out our economic calendar.

After the FED, a Follow up to Monday’s Post for The NQ Emini Daily Chart

NQ-on-the-day-this-morning

“Second, we are testing the VPOC (the volume point of control) shown with the yellow dashed line at 14,925 where we can expect to find support and see congestion building in the short to medium term as the market settles after this latest washout. Note too how the price has plunged through the low volume node of the VPOC histogram in the 15,200 area which is what we would expect to see. Volume on the Y-axis acts as support and resistance in the same way as price-based s&r does.

Hence when we approach low volume areas such as this, or high volume areas at the VPOC itself, this gives us an insight into what to expect next. And in this case, it’s likely to be a period of congestion around the 14,900 area.

Finally, as I mentioned on my Facebook page today’s market gyrations could be seen as a shot across the FED’s bows ahead of the FOMC on Wednesday. We shall see.”

And so it proved to be and since writing the above the session closed with two confirming signals. First, the strength of the buying which appeared late in the session, as evidenced by the depth of the lower wick. Second, the volatility trigger which confirmed the price action had moved outside of the Average True Range (ATR), and when this is coupled with high volume, it confirms the presence of the market makers and big operators and we can therefore expect one of two things to happen.

Either congestion within the spread of the candle itself, or a reversal. Furthermore, as I explained in Monday’s analysis, the VPOC was waiting below as denoted with the yellow dashed line and further reason to expect this reaction to be no more than a shakeout as opposed to the start of the big short.

Now with the FOMC out of the way, markets are waking to sunny uplands with the yen complex in a bullish mood. Of these the CAD/JPY is leading the way helped by oil and whilst this analysis has been centered on the NQ Emini, the same thoughts can be applied equally to the ES Emini and also the YM, with all three moving firmly higher and looking set to recover Monday’s losses in double-quick time. And with a low volume node ahead and a breach of the price-based resistance in the 15,000 region, the outlook looks positive once again but it is one that needs to be validated by volume.

By Anna Coulling

Say Bye-Bye to Major Supports. We May Not See Those Levels for a While

And it happened! The bears were talking about this for a long time and it finally happened; a bearish correction. The price broke the long-term up trendline on the SP500 and is aiming lower. The target for the drop is still far away, so it might be nice to buckle up.

The DAX also dropped like a rock after the breakout of the long-term up trendline and the neckline of the triple top formation. The next target: 14100 points.

Although indices are sliding, gold is not climbing higher. A stronger dollar is definitely not helping.

The GBPUSD came back inside the falling wedge pattern. That’s definitely negative.

The CADJPY is aiming for the 38,2% Fibonacci to test it as a crucial support.

The EURNZD is inside a small sideways trend. A breakout from it, will show us a direction.

The EURJPY has failed to create the inverse head and shoulders pattern and dropped lower.

The USDJPY bounced from the upper line of the triangle and brought us a sell signal with the target being on the lower line of this pattern.

For a look at all of today’s economic events, check out our economic calendar.

Japanese Yen Currency Pairs Elliott Wave Analysis – Looking Higher

As per Elliott Wave analysis, AUDJPY made a deep pullback in the last few months from 86.00 area, but this can be a contra-trend move if we consider that market came down with overlapping price action after previously completed five waves up. Such pullbacks are normal. What is very interesting now, is a bounce away from 78.44 support and current rise back to the upper side of a channel where breakout is expected to cause more bullish price action as higher degree wave B) can be finished.

AUDJPY Daily Elliott Wave Analysis Chart

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CADJPY came down to 85.30 support, back to the former wave four from where we can already see some bullish price action. In fact price is trying to break out of a downward corrective channel that can bring more gains ahead, especially if we consider that drop from 91.00 area is having a corrective look, thus it can be wave B so ideally higher degree wave C is in play.

CADJPY Daily Elliott Wave Analysis Chart

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Canadian Dollar Reverses the Losses From the Last Week

Global indices continue the reversal. Asian stocks started the week off on the front foot and the rest of the world is about to follow.

SP500 is aiming for new all-time highs. Most probably, buyers will succeed.

DAX is defending the crucial horizontal support on the 15800 points.

Gold ends last week’s correction and breaks the upper line of the flag, aiming north.

The EURUSD is still inside of the wedge pattern with a negative sentiment.

The USDCAD is aiming lower after the bounce from the 38,2% Fibonacci. Sentiment is back to negative.

The GBPCAD is showing us the beauty of the false breakout pattern. The sentiment is bearish.

The EURCAD fails to break the neckline of the iH&S formation.

The CADJPY shows strength by bouncing from the neckline and the 38,2% Fibonacci.

For a look at all of today’s economic events, check out our economic calendar.

Exclusive: BOJ Seen Cutting This Year’s Growth Forecast as COVID-19 Curbs Hurt Outlook

But the central bank is likely to maintain its view the world’s third-largest economy is headed for a moderate recovery as robust exports and output offset some of the weakness in consumer demand, said four sources familiar with its thinking.

The expected downgrade highlights Japan’s struggle to contain the COVID-19 pandemic, as slow vaccine rollouts and a resurgence in infections force authorities to declare a state of emergency for Tokyo just 16 days before the Olympic Games begin.

“The foundations of a recovery are in place, but the timing may be delayed somewhat,” as the curbs weigh on the economy’s expected rebound in the current quarter, one of the sources said, a view echoed by three other sources.

In most recent forecasts made in April, the BOJ expected the economy to expand 4.0% in the current fiscal year ending in March 2022, higher than a 3.6% growth projected in a Reuters poll.

At its July 15-16 policy meeting, the BOJ will likely cut the current year’s growth forecast in fresh quarterly and inflation projections, the sources said. It is also widely expected to keep monetary settings unchanged.

In the new estimates, the BOJ will likely revise up this fiscal year’s consumer inflation forecast mainly reflecting the boost from recent rises in energy costs, the sources said.

The growth projections for next fiscal year ending in March 2023 will depend much on when households begin to feel safe enough to boost spending on leisure and travel, analysts say.

The central bank currently expects the economy to expand 2.4% next fiscal year and 1.3% the following year.

The BOJ estimates that households have 20 trillion yen ($182 billion) in “forced” savings accumulated last year due to stay-at-home policies, which could be tapped when vaccines are rolled out widely.

Japan’s economy shrank an annualised 3.9% in January-March and likely barely grew in the second quarter, as the pandemic took a toll on service spending.

Analysts and policymakers had expected the economy to enjoy a solid rebound in the latter half of this fiscal year, in part hoping that steady vaccinations and removal of curbs would spur pent-up demand for leisure and travel.

For a look at all of today’s economic events, check out our economic calendar.

($1 = 110.0400 yen)

(Reporting by Leika Kihara and Takahiko Wada; Editing by Shri Navaratnam)

 

GBP/JPY Vs GBP/USD and USD/JPY – March 6th, 2021

GBP/USD last week fell 236 pips from 1.4015 to 1.3776 while overbought GBP/JPY rose 257 pips from 148.14 to 150.71.

Known since the 1930’s, the Japanese pegged GBP/JPY to UK Gold for not only economic viability but the first incursion to the western world of finance. The standard to hold GBP/JPY to the UK held throughout Bretton Woods. Upon the 1972 free float, GBP/JPY became attached permanently with high +90% correlations to GBP/USD.

All JPY cross pairs followed with high and positive correlations as AUD/USD and AUD/JPY, NZD/USD and NZD/JPY, EUR/USD and EUR/JPY while USD/CAD and CAD/JPY became polar opposites as both permanently correlate negatively. USD/CHF and CHF/JPY traditionally also hold opposite correlations.

The Japanese offered not only a double trade but GBP/JPY and GBP/USD as the same exact currency pairs. The same principle holds true for EUR/JPY and EUR/USD, AUD/USD and AUD/JPY and NZD/USD and NZD/JPY. The double trade is permanent for USD/CAD and CAD/JPY.

Why JPY cross pairs remain overbought into week 6 amd not falling with counterpart currencies is the USD/JPY problem to correlations. While GBP/USD correctly correlates to GBP/JPY at +94%, GBP/JPY also not correctly correlates to USD/JPY at +83%. A further problem exists as GBP/USD correlates to USD/JPY at +46 %. All correlations are not only running positive but this situation is the exact same for AUD/JPY, NZD/JPY, EUR/JPY, CAD/JPY and explains why prices remain high and overbought.

Positive correlations are the result of exchange rate prices and relationships to moving averages since correlations are found within the context of averages. USD/JPY trades above vital 105.70,  GBP/USD above 1.3697 and GBP/JPY above 144.80. Correlations are positive because prices trade above respective high / low averages.

Required to assist GBP/JPY to drop is GBP/USD breaks 1.3697 or USD/JPY trades below 105.70. GBP/JPY then decides to fully correlate to USD/JPY or GBP/USD. GBP/JPY in every instant follows GBP/USD as the 91 year correlation and order of currency markets.

Current GBP/JPY trades 1156 pips above GBP/USD and 2506 pips below GBP/CAD. GBP/JPY larger range from GBP/USD becomes 144.08 and 1.5564. GBP/JPY above is located the 14 year average at 155.38 and the 10 year at 148.36.

Prior to the 2016 interest rate changes by the central banks, the market order to currency pair arrangement existed as GBP/USD, GBP/JPY, GBP/CHF then GBP/CAD.

The new order is arranged as GBP/CHF, GBP/USD, GBP/JPY then GBP/CAD and seen as GBP/CHF 1.2855, GBP/USD 1.3820, GBP/JPY 149.86 or 1.4986 then GBP/CAD 1.7292. Much daylight exists for GBP/JPY to trade freely between GBP/USD and GBP/CAD yet 250 pips traded last week from a distance of 1100 and 2500 pips between exchange rates.

Why GBP/CHF and all currency  pairs arranged as Other Currency / CHF dropped from contention as support is due to the uniqueness to the SNB’s interest rate system. Libor is miles from actual interest rates as first comes Saron, Call Money rates and the most vital Debt Register Claims.

JPY cross pairs overall contain downside moves from GBP/JPY at 300 pips and 200 for AUD/JPY and NZD/JPY.

USD/JPY for the week is not only light years overbought but the 5 year average is located at 109.01. A good target is found at 106.65.

GBP/JPY big break lower is located at the 10 year average at 148.38. A break then GBP/JPY trades 146.00’s easily.

GBP/USD this week opens between 1.3768 and 1.3840. Below 1.3768 challenges most vital 1.3697, above 1.3840 then GBP/USD travels much higher.

GBP/CHF and GBP/CAD run good and positive correlations at +93% and +96 % for GBP/CAD. For GBP/NZD and GBP/AUD remain problems as correlations run negative at -43% and -64% for GBP/AUD.

GBP/JPY

Included are GBP/JPY moving averages from 5 day to 253 days. The averages are perfect and derived from the ECB. The first number is the day average followed by trading days then the average.

A 20 day average is actually 15 days, a 50 day average is actually 36 days. Trading day averages to factor perfectly start at the beginning of every year then the numbers increase as days trade. A 50 day average is most stable as it only trades 36 to 50 days.

A 5 day average begins Monday at 2 days, then 3 for Tuesday and Wednesday and 4 for Thursday. A full 5 day average only trades on Fridays.

5 Day     5             149.2391

10 Day  9             149.1325

20 Day  15           148.3808

50 Day  36           145.2691

100 Day               71           142.5398

200 Day               143       139.9417

253 Day               180       139.1231

As GBP/JPY trades lower then the averages drop.

Targets

Targets are not only known miles ahead but targets stack to watch trades unfold.

Current targets: 149.7549, 149.8496, 149.5086, 148.1852, 146.0887, 143.7901, 143.0356.

The ECB and most central banks factor exchange rates to 6 decimal places and 4 for USD/JPY and JPY cross pairs and I follow the ECB exactly.

Having Suggested the Markets Lacked Inspiration and that Risk Assets would Look to Chop Around in the Short

If I look cross-asset it feels like the bulls have just won a small battle here, with equities working fairly well, especially in the small end of town (the Russell 2000 closed +1.1%) while tech worked nicely (the NAS100 +1.2%), with cash volumes somewhat in line with the 30-day average.

I continue to look at the chart of the NAS100 and see a thing of beauty – Flip to the daily and see a bullish outside day reversal, although the weekly shows the pure rhythm and flow – it’s one where we’ll look back forget valuation, forget any traditional fundamentals and just hold the thing…less thinking, more profits.

The S&P500 lagged a touch (+0.6%), held back by financials (-0.5%) and health care (-0.4%), with the outperformance seen in tech, utilities, and consumer names. Everyone loves a spurious overlap of the current tape versus a key period in time, and this from Bloomberg makes me question if what we’re seeing is really a re-run of the move post-2009 – if this continues to track then equities have far more juice in the tank.

Lower equity volatility ahead?

Vols have been offered, with VIX pushing down 3.38 vols to 31.74%, while on the VIX futures (which is what our price is derived) we see a bearish outside day, and if we see follow-through selling we could see a re-run into 27%. When we consider that the daily implied S&P500 move (higher or lower) portrayed by the VIX index is 2%, then it feels that anecdotally that there are downside risks to the vol index.

Commodities are hot

Our flow in commodities has been strong, with gold getting a strong working over, notably in USD-terms (XAUUSD). We pushed into 1763, although the breakout is not as convincing as I would like to have seen and the 18 May highs are seemingly a tail barrier. It’s hard to be anything but long gold here, especially given the dynamics in the bond market, with 5- and 10-year breakevens (inflation expectations) rising 5bp (0.05%) a piece, and nominal Treasury yields up 1bp across the curve – this has resulted in ‘real’ yields moving lower, and at -79bp (on UST 5yr real) we’re not far from testing the March lows of -84bp.

Real rates are core to markets right now and if yields are going lower then gold will find buyers on weakness and equity will continue to trend.

It’s not just gold, but crude has caught a bid and our XTIUSD price (which basically tracks front-month futures) is not just testing the top of its range, but closing the 6 June gap at $41.05. Traders react to behaviour around gaps, it’s a science in trading, but a break here takes us to the 61.8% fibo and 200-Day MA ($44.18 and $45.47).

Copper is now +1.2% at $2.65p/lb – there seems to be a clear message we’re getting from the copper market because the moves I am seeing on the daily look bullish. As suggested yesterday, whatever copper is seeing is not shared by the bond market, which doesn’t seem to be buying the recovery play just yet, with yields unaffected and perhaps that is moving full circle into the risk sentiment.

The secret sauce

Consider this – Commodity prices higher, inflation expectations up (5yr breakevens +5bp at 1.12%, 5y5y forward B/E +4bp at 1.53%, 5y5y swap +4bp at 1.83%), high yield credit 2bp tighter, yet nominal bond yields unnerved. This is where I see the bulls winning a short-term battle.

FX moves – the USD sell-off resumes

We can’t leave out FX markets, because the USD is lower by 0.6%, and the dynamics mentioned above have resonated in a bid in risk FX. The lower USD would have fed back into commodity buying and again into lower real yield – it goes full circle. We’ve seen bullish key day reversals in CADJPY, AUDJPY, and EURJPY, so the move to sell JPY shows the bulls are back in the driving seat.

EURUSD stopped shy of printing a bullish outside day, as price failed to make a lower low, but did close firmly above Fridays high – a similar effect. The USDX (USD index) closed through the ST uptrend and we’ll watch for how Asia and EU trade the move – as follow-through will confirm a potential change in structure in the FX market and perhaps allow further USD selling.

For those running EUR or EU equity exposures do consider the key event risk on the docket is the EU PMI data. You can see expectations, and for the EUR to build on the move an upside surprise would clearly help.

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Chris Weston, Head of Global Research at Pepperstone.

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USD/JPY Price Forecast – US Dollar Continues to Hover Around 107.50

The US dollar has rallied a bit during the trading session only to give all of those gains back up on Wednesday as we simply have nowhere to be. This market has dance around the 107.50 level quite often, and it looks like we are going back into another one of those times where the market has nowhere to be. With the lack of news, it is very unlikely we get a big move unless it is a bit of a “knock on effect” from other markets.

USD/JPY Video 18.06.20

At this point, I continue to use this pair as an indicator for other Japanese yen related pairs. In other words, if it starts to drift lower than I might look to short another pair such as the AUD/JPY pair, CAD/JPY pair, and so on. Ultimately, I believe that this market will try to find its way forward, but it is not until we get an impulsive candlestick on a daily chart that I think it is worth bothering with.

The 200 day EMA and the 50 day EMA are sitting just above offering resistance but they are going sideways so I do not know that we are quite ready to break out to the upside but having said that the downside has been incredibly supportive as well. With that in mind, I think the market just chop back and forth and therefore unless you are a short-term back-and-forth type of trader, it is probably exceedingly difficult to put any money to work here.

For a look at all of today’s economic events, check out our economic calendar.

USD/JPY Price Forecast – US Dollar Looking for Buyers Against Yen

The US dollar has cracked below the ¥107 level during the trading session on Thursday, as we continue to see a lot of negativity out there. After all, the Dow Jones Industrial Average futures are down about 900 points at the open, and this typically favors this pair falling due to the fact that the market starts looking for safety in the form of the Japanese yen. If we can continue the momentum, the next support level is closer to the 160 and level.

USD/JPY Video 12.06.20

On the other hand, if the market saved itself yet again, then it is likely that we will go looking towards the ¥107.50 level, and then after that go looking towards ¥108. Moving above the ¥108 level allows for the market to go looking towards ¥109, and of course followed by ¥110. I do not necessarily think that we are suddenly going to rally, but then again it is easy to say what we “should” and” should not do”, because quite frankly the markets have not been paying attention to any of that for a while.

With this being the case, I continue to use this pair more or less as a Japanese yen strength or weakness indicator, and not necessarily trade it directly. At this pair continues to fall hard, then it is possible to short other pairs that will give you a little bit more momentum like the AUD/JPY pair, NZD/JPY pair, CAD/JPY pair, and so forth. This pair is a little congested and noisy, which makes quite a bit of sense considered both currencies are thought of as “safety currency.”

For a look at all of today’s economic events, check out our economic calendar.