USD/JPY Tightens Near the 114.00 Level

Posted Wednesday, November 14, 2018 by
Shain Vernier • 1 min read

Amid the recent pressure on U.S. stocks, traditional safe-haven assets have not performed well. Weakness in the Japanese yen, Swiss franc, and gold have highlighted the limited interest in fleeing from U.S. equities. However, this dynamic may be ready to shift.

A reversal of today’s early rallies in the DJIA and S&P 500 is prompting many investors to consider moving into safe-havens. At the moment, this notion is becoming more and more relevant. We are seeing slight gains in gold, the Swiss franc, and some selling the USD/JPY.

USD/JPY Technical Outlook

The last five sessions have brought heavy two-way action to the USD/JPY near the 114.00 handle. Is this pair gearing up for a directional move in coming sessions?

USD/JPY, Daily Chart
USD/JPY, Daily Chart

In my opinion, there is little doubt that the USD/JPY is preparing for a breakout. Daily ranges are consolidating, yet have not produced a serious retracement. A bullish bias remains valid given the technical outlook and lack of any concerted selling since early September.

Bottom Line: Several upcoming fundamentals are poised to drive action to the USD/JPY. It will be wise to pay attention to this afternoon’s scheduled speech for FED Chairman Jerome Powell. His comments will be scrutinized, especially as they pertain to last week’s Midterm Elections. While central bankers usually steer clear of politics, I expect Powell to address the outcome and potential impact of a split U.S. government in some capacity.

In the event that we see a bullish break, a sell from yearly highs in the USD/JPY will come into play. Going short from 114.44 is a positive entry to the bear and a moderate profit target is warranted. This trade produces a tight 15 pips on a 1:1 risk vs reward management plan and an initial stop loss at 114.59.

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