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Yen Falls on US Economic Stability, USDJPY & GBPJPY Outlook

by on November 12, 2013 4:40 am GMT
 

The Japanese yen is showing further weakness against the dollar as the spread between Japanese and US 30Y treasuries widen to levels not seen since 2011. The widening spread is signaling that investors are more confidence that the US economic is gaining stability. The yen’s slide has be triggered by a reassurance of positive economic data out of the United States. Tsutomu Soma, fixed-income at Rakuten Securities Inc., said that even with the potential of reduced Fed stimulus, equities are holding, and this has increased yen selling.

The dollar-yen is trading higher during the Asian session, up 37 pips to 99.52. The pair was able to find support just under 99 last week before rallying on its way to 100. There is a 20/50 EMA crossover in progress which could help boost the USDJPY to the key psychological level of 100, which has been challenging to break through this year.

Topside resistance is at that 100 level, while support still lies at 98.97. A break above 100, the pair could trade up to 100.61 before catching the next line of significant resistance. The ADX is showing a weak trend, but the dollar strength and yen weakness is causing the pair to grind higher.

1D Chart of USDJPY

1D Chart of USDJPY

The Pound-yen is also trading higher on yen weakness, while the Pound is trading lower against the dollar. Currently trading up 34 pips to 158.98. The usually volatile pair has been tame as it entered range bound trade after hitting the yearly high of 159.96.

Price action have stayed true to an ascending trend line originating at the pair’s low. The ADX is a meager 7, but the +DMI is continuing to slope upward which may lead to continued range bound activity.

A break above 159 will lead to price action resistance at 159.36, while an opportunity may exist to retest the highs, but that is unlikely considering the Sterling’s poor performance. Britain’s CPI data release this morning will provide a boost in either direction. If consumer-prices decline, as expected, GBPJPY may not see much movement.

1D Chart of GBPJPY

1D Chart of GBPJPY