VOT Research Report
Analytics and Recommendations
Fundamental and Analytical Perspective
THE NEWS AND ANALYTICS FOR USD/JPY
Risk sentiment is impacted by disappointing Chinese data and district lockdowns in Guangzhou.
Notwithstanding the bearish triangle, yen performance may be fleeting as long as the 145 psych barrier continues to hold. Carry trade characteristics are still favorable as the Fed raises US CPI and Michigan consumer sentiment data are due next, followed by Japan GDP the following week.
GUANGZHOU DISTRICT LOCKDOWNS AND Frustrating CHINESE DATA WEIGH ON Investor Sentiment
The recent decline in risk sentiment has been exacerbated by news of yet another district lockdown in Guangzhou, a major manufacturing center. This comes after another “suprise” for the cryptocurrency world when Binance revealed its desire to acquire competing crypto exchange FTX amid severe liquidity shortfalls, subject to investigative work.
The Japanese Yen appeared to have benefited the most from recent events overnight, as it emerged as the top forex performer in the early morning hours, with the NZD underachieving in response to the bad news accumulating in China. Advances in gold, a currency seen as a safe haven like the yen, have also been fueled by a declining dollar and a chaotic cryptocurrency market. Chinese CPI earlier today came in below expectations of 2.4%, printing at 2.1%, highlighting the dangers of deflation as the country continues to prioritize its zero-COVID policy before of growth in the economy.
Source: FinancialJuice,
Given the recent losses in the value of the US dollar and the US 10-year treasury, the short-term drop of the USD/JPY forex pair is not unexpected. After Jerome Powell stated that eventually it will be fair to slow the pace of rate hikes, the markets are pricing in a lesser rise in interest rates for December (50 bps vs. 75 bps). The long dollar strategy, which has had slower movements in USD/JPY, was considered by the market as an opportunity to be somewhat deflated.
YEN Effectiveness COULD BE SHORT-TERM IN SPITE OF Substantial SUPPORT
Following Japan’s Ministry of Finance’s most recent FX intervening actions on Friday, October 21, after Asian and European traders had already left for the day, USD/JPY is currently trading little more than 4% lower. Previous attempts to reduce the USD/JPY currency valuations were unsuccessful, but this time around it seems like there will be more of a return on investment thanks to a weaker USD.
Despite the fact that this pattern is typically seen in the context of a wider decline rather than an upswing as has been the scenario, a descending triangle can be seen on the daily chart. However, the MACD indicator warns that a break below the pattern near 145.20/00 may signal the possibility of trading lower.
Meanwhile, the USD/JPY chart shows strong resistance preventing a decline. The 50 SMA, the psychological threshold of 145, and the weak fundamentals indicate that the USD/JPY may continue to be supported for some time. As the Fed plans to raise rates to 5% early next year, expanding the interest rate disparity between the two countries, it seems that the yen’s nearer-term drivers are just that—short-term. A reversal of the carry trade is still some time away.
The overall uptrend from 75.56, which includes the upswing from 101.18, is continuing in process (2011 low). The top of 147.68 from 1998 has been already reached, and there are now no overt signals. In any case, the first indication of a medium-term topping trend would be a violation of the 140.33 support level. If not, further growth is advantageous to the subsequent aim of 160.16 (1990 high).
Another set of circumstances: increase to Y148.85, then final stabilization above MA 200 H1 (Oct 31 high).
88% BUY is the average score.
Calculated using data from each of the 13 indicators. Signal Direction is a short-term (3-Day) evaluation of the movement of the Signal, whereas Signal Strength is a long-term assessment of the historical Signal’s strength over time.
