Analys från DailyFX

Don’t Fight Bank of Japan

Published

12 år ago

9 april, 2013

DailyFX

Summary: The Japanese Yen has fallen dramatically on a critical Bank of Japan decision. Here’s a list of currencies we think may do particularly well against the JPY through upcoming trading.

Correlation between the USDJPY and the 10-Year Japanese Government Bond Yield

bank_of_japan_offers_japanese_yen_trading_body_Picture_1.png, Don't Fight Bank of Japan - Ranking Currencies vs Japanese Yen

US Dollar/Japanese Yen Exchange Rate (lhs)

Inverse of the 10-Year Japanese Government Bond (JGB) Yield (rhs)

Correlation between the USDJPY and inverse of 10-Year Japanese Government Bond Yield

The US Dollar/Japanese Yen exchange rate surged and the 10-year Japanese Government Bond (JGB) Yield tumbled following the Bank of Japan’s decision to embark on hyperactive Quantitative Easing measures. Recent price action put the short-term correlation between the USDJPY and JGB’s to its strongest in over a decade.

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In effect we can “explain” recent Japanese Yen weakness (USDJPY strength) by simply looking at Japanese Government Bonds. Why? After over a decade of Zero Interest Rate Policy (ZIRP) in Japan, the Japanese investor has become the largest net-creditor to the rest of the world. In other words—Japanese capital chases higher yields available abroad.

Ranking Currencies Against the Japanese Yen

bank_of_japan_offers_japanese_yen_trading_body_Picture_2.png, Don't Fight Bank of Japan - Ranking Currencies vs Japanese Yen

All else remaining equal, we predict that extremely low JGB yields will continue to push the Japanese Yen to fresh lows against currencies with higher interest rates and better yield prospects. Unfortunately none of the major currencies really fit the bill, as almost all major government bond yields trade below their long-term moving averages.

If we can’t get a perfect fit, we can get close; the Euro seems to be in a relatively good position to benefit from Japanese investor inflows, while the Australian and New Zealand Dollars are not far behind. It does not seem completely coincidental, then, to note that post-BOJ performance lines up fairly well with yields. We expect relative interest rates to continue driving the Japanese Yen currency pairs through the foreseeable future.

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Forex Correlations Summary

View forex correlations to the SP 500, SP Volatility Index (VIX), Crude Oil Futures prices, US 2-Year Treasury Yields, and Spot Gold prices.

— Written by David Rodriguez, Quantitative Strategist for DailyFX.com

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David specializes in automated trading strategies. View an outline of the most popular sentiment-based trading signals—including download links—via this DailyFX article on trading systems.

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Analys från DailyFX

EURUSD Weekly Technical Analysis: New Month, More Weakness

Published

7 år ago

30 september, 2017

DailyFX

What’s inside:

EURUSD broke the ‘neckline’ of a bearish ‘head-and-shoulders’ pattern, April trend-line
Resistance in vicinity of 11825/80 likely to keep a lid on further strength
Targeting the low to mid-11600s with more selling

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Coming into last week we pointed out the likelihood of finally seeing a resolution of the range EURUSD had been stuck in for the past few weeks, and one of the outcomes we made note of as a possibility was for the triggering of a ’head-and-shoulders’ pattern. Indeed, we saw a break of the ’neckline’ along with a drop below the April trend-line. This led to decent selling before a minor bounce took shape during the latter part of last week.

Looking ahead to next week the euro is set up for further losses as the path of least resistance has turned lower. Looking to a capper on any further strength there is resistance in the 11825-11880 area (old support becomes new resistance). As long as the euro stays below this area a downward bias will remain firmly intact.

Looking lower towards support eyes will be on the August low at 11662 and the 2016 high of 11616, of which the latter just happens to align almost precisely with the measured move target of the ‘head-and-shoulders’ pattern (determined by subtracting the height of the pattern from the neckline).

Bottom line: Shorts look set to have the upperhand as a fresh month gets underway as long as the euro remains capped by resistance. On weakness, we’ll be watching how the euro responds to a drop into support levels.

For a longer-term outlook on EURUSD, check out the just released Q4 Forecast.

EURUSD: Daily

—Written by Paul Robinson, Market Analyst

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You can follow Paul on Twitter at@PaulRobinonFX.

Analys från DailyFX

Euro Bias Mixed Heading into October, Q4’17

Published

7 år ago

29 september, 2017

DailyFX

Euro Bias Mixed Heading into October, Q4'17

Why and how do we use IG Client Sentiment in trading? See our guide and real-time data.

EURUSD: Retail trader data shows 37.3% of traders are net-long with the ratio of traders short to long at 1.68 to 1. In fact, traders have remained net-short since Apr 18 when EURUSD traded near 1.07831; price has moved 9.6% higher since then. The number of traders net-long is 15.4% lower than yesterday and 16.4% higher from last week, while the number of traders net-short is 0.4% higher than yesterday and 10.5% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EURUSD prices may continue to rise. Positioning is more net-short than yesterday but less net-short from last week. The combination of current sentiment and recent changes gives us a further mixed EURUSD trading bias.

— Written by Christopher Vecchio, CFA, Senior Currency Strategist

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

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Analys från DailyFX

British Pound Reversal Potential Persists Heading into New Quarter

Published

7 år ago

29 september, 2017

DailyFX

British Pound Reversal Potential Persists Heading into New Quarter

Why and how do we use IG Client Sentiment in trading? See our guide and real-time data.

GBPUSD: Retail trader data shows 38.2% of traders are net-long with the ratio of traders short to long at 1.62 to 1. In fact, traders have remained net-short since Sep 05 when GBPUSD traded near 1.29615; price has moved 3.4% higher since then. The number of traders net-long is 0.1% higher than yesterday and 13.4% higher from last week, while the number of traders net-short is 10.6% lower than yesterday and 18.3% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBPUSD prices may continue to rise. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current GBPUSD price trend may soon reverse lower despite the fact traders remain net-short.

— Written by Christopher Vecchio, CFA, Senior Currency Strategist

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

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