Weakness in the Yen Is Over for Now

Almost two weeks ago, I underlined the case for on-going weakness in the Japanese yen. The U.S. dollar had rallied to 80.60 against the yen (USD/JPY) in almost a straight line. I chose that point to close out my yen shorts to wait for what I thought would be an inevitable pullback from such a sharp move.

It took today’s correction in worldwide stock markets to finally rekindle strong interest in the yen again. Although USD/JPY has yet to break below 80.60, I decided to start rebuilding shorts against the yen. I strongly suspect the yen will eventually press currency pairs to supports at the 50 and/or 200-day moving averages, but I want to have at least small positions in place in case the yen’s weakness once again outstrips my expectations.

The trend break is clear in the chart of USD/JPY below. This follows a marginally new 9-month high which itself was preceded by another large down day. These large one-day moves suggest the upward momentum in USD/JPY is finally exhausted for now. It is time for some consolidation and/or a firm test of lower support at the 50 and/or 200DMAs below.


USD/JPY looks ready for a rest
USD/JPY looks ready for a rest

Against the pound, the yen has only broken the strongest uptrend in place which represented a ramp up in GBP/JPY. For the same reasons that apply to USD/JPY, I think GBP/JPY is showing it is ready for a rest and/or test of critical lower support. In this case, there is still one more uptrend that can provide support.


The yen is finally pressuring the pound as well
The yen is finally pressuring the pound as well

Source for charts: FreeStockCharts.com

Be careful out there!

Full disclosure: long USD/JPY

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