Date: 11 Jul 2017

Given BOJ Governor Haruhiko Kuroda’s reiteration on Monday of the Japanese central bank’s determination to maintain its ultra-accommodative monetary policy until inflation in Japan is perceived to have stabilised above 2 per cent, traders are again looking at the yen’s prospects.

Yen bears may choose to express a view that the Japanese currency will continue to weaken through the medium of dollar/yen (USDJPY) but with event risk surrounding Wednesday’s testimony by Fed Chief Janet Yellen and release later in the week of US retail sales and inflation data, traders might also be casting an eye over euro/yen (EURJPY). If that’s the case, traders might be interested in Thomson Reuters IFR’s (TRIFR) technical view of euro/yen published on Monday.

TRIFR is focusing on the euro/yen’s 200-week moving average which it identifies at 130.71 this week. Traders will note that as this is a weekly moving average it will be the weekly close of EUR/JPY on Friday that is key.

With that proviso in mind, it’s worth noting that TRIFR has noted that previous breaks of the euro/yen weekly moving average “have produced sizeable and sustained trending moves.

“For instance, an upside breaks of the [weekly moving average] in 2013” TRIFR writes “resulted in a rally of approximately 29 percent lasting nearly 2 years while a break to the downside in 2016 yielded a decline of approximately 16 percent over a 4-month period.

” As for the here and now, TRIFR contends that “a weekly close [in EURJPY] above the [weekly moving] average will initially target a move to 134.32, the 61.8 per cent Fibo of the 2014-16 decline, with the ultimate potential for a retracement to the 76.4 per cent Fibo at 140.23.”

Additionally, TRIFR considers that “last Friday’s close above the 50 per cent retracement at 129.55 has greatly strengthened the [pair’s] technically positive picture.

 

Written by Neal Kimberley, External Currency Analyst.
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