Two Straight Losing Weeks For The USD/JPY?
With a bit over 24 hours left in the forex week, the Greenback has had a rough four days vs the majors. The EUR/USD (+0.57%) and GBP/USD (+0.58%) have trended higher, while USD/CHF (-0.23%) and USD/JPY (-0.79%) have moved lower. For now, it’s possible that the U.S. dollar has already posted its high water mark for 2021.
On the news front, U.S./Russia/Ukraine geopolitical strife is negatively impacting the USD. About an hour ago, POTUS Joe Biden decided to hit Russia with a fresh set of sanctions. Here’s the latest:
- The U.S. formally named the Russian Foreign Intelligence Service as being the culprit behind the SolarWinds hack.
- 10 Russian diplomats are to be expelled from Washington, D.C.
- New financial restrictions targeting Russian sovereign debt are being put into place.
Today’s sanctions come on the heels of yesterday’s posturing from the U.S. State Department in response to Russia/Ukraine military escalation. Since the announcement, safe-havens are up, led by gold (+1.88%) and the USD/JPY (-0.18%). Are investors already pricing-in the potential for armed conflict on the Russia/Ukraine border?
A Rough Two Weeks For USD/JPY Bulls
2021 has been a decent year for the Greenback as values have rallied from 2020’s plunge. USD/JPY bulls are the primary beneficiaries, gaining more than 500 pips. However, it appears as though the tides are beginning to turn.
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Here are two levels that will be on my radar in the weeks to come:
- Resistance(1): 2021 High, 110.96
- Support(1): 38% Retracement, 107.76
Bottom Line: If tensions continue to grow between the U.S. and Russia, the USD/JPY is likely headed much lower. Under this scenario, a buying opportunity may come into play from the 38% retracement. As long as 110.96 is 2021’s high, I’ll have buy orders in the queue from 107.79. With an initial stop loss of 107.46, this trade produces 25 pips on a sub-1:1 risk vs reward management plan.
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