More Yen Selling On Tap For 2015?
Matthew Weller | Dec 17, 2014 06:41AM ET
As we look back at 2014, one of the biggest forex trading themes of the year was the same as 2013: the Japanese yen consolidated for most of the year before falling sharply into the end of the year. Now, traders are once again wondering whether the recent weakness in yen is here to stay or whether Japan’s currency is due for another dull sideways period in 2015. To tackle that question, we look at each of the three most widely-traded yen pairs below:h3 USD/JPY: Rally Intact Above 50-Day MA/h3
On a technical basis, USD/JPY was kind to bulls in 2014. After consolidating in the 101.00-104.00 range for the first half of the year (not shown), rates finally broke out of the top of a descending wedge pattern in July and proceeded to surge to nearly 122.00 in early December.
As of this writing in mid-December, year-end profit-taking and risk aversion have pulled the pair down to its 38.2% Fibonacci retracement at 115.50, but the broader uptrend still remains intact. That said, buyers would like to see bullish confirmation from the secondary indicators sooner rather than later. For now, the MACD is dropping back toward the “0” level and the RSI is dropping toward the bottom of uptrend’s range at 40 after a clear bearish divergence in early December. Bulls can rest easy as long USD/JPY remains above its 50-day MA at 114.00, as rates haven’t closed below that rising support level since breaking out in July. To the topside, the 120.00 psychological level and 6-year high at 121.80 could provide resistance initially.
By definition, EUR/JPY’s chart looks similar to USD/JPY’s (or any other yen pair), because it is similarly exposed to the yen, which has been one of the strongest return drivers of the last two quarters. Therefore, it’s not surprising that EUR/JPY is putting the finishing touches on a strong 2014 as we go to press. Unlike USD/JPY though, the pair has made essentially no progress over the last month, showing a weaker and potentially more vulnerable uptrend.
Like with USD/JPY, both the MACD and RSI indicators have rolled over and are showing declining bullish momentum, though the pair is holding above previous-resistance-turned-support at 145.70. Even if this support level fails, the 50-day MA and 38.2% Fibonacci retracement near 143.50 could still provide a pocket of support for the uptrend. Meanwhile, the 150.00 barrier may prove to be a major resistance hurdle for bulls to navigate early in 2015.
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Not surprisingly, GBP/JPY has also rallied consistently over the last few months. The pair, which has a reputation for some of the highest volatility in the G10 universe, managed to tack on over 2,000 pips in less than two months from mid-October to early-December. Like USD/JPY and EUR/JPY, the uptrend remains intact as of this writing in mid-December, despite the recent weakness in the MACD and RSI indicators.
Unlike those rivals however, GBP/JPY’s uptrend has a clear “line in the sand” where the 50-day MA, previous-resistance-turned-support, and the 38.2% Fibonacci retracement all converge in the 180.75-181.25 range. If rates break below this floor, a deeper retracement toward at least 175.00, if not lower, could follow in short order. On the other hand, as long as that area holds, bulls will turn their eyes higher toward the 2014 high near 190.00.
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