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We haven’t talked about the currency of the country of the rising sun for a long time. Why not? Nothing interesting happened in the dollar/yen pair last year. However, for the fourth month of this year, the yen is pleasing traders with strong directional moves.
USD/JPY
What have we written about repeatedly in the past year? The dollar/yen pair has been in a tight corridor for a long time. The bears tried to break through the 100 level. But they did not succeed.
With the start of 2021 the American dollar began to rise sharply against other currencies. Added to this was the rise in stock markets. And the expectation that the coronavirus epidemic will soon be over.
When does the Japanese yen rise? Only when investors sell off assets and go into shelter currencies. Right now the situation is exactly the opposite. Against that background the Yen has fallen 9-figures against the USD, breaking through the strong resistance of 110. Naturally, the big players took off their stops behind this level.
There was no one to buy the pair further and it has been showing weak dynamics for 5 trading sessions in a row. Now comes the moment of truth for the Japanese currency. And it depends on the US stock market.
If it enters a correction phase, traders will exploit the following simple trading idea. Short from the current level with a close stop above 110 Yen per $1. The risk/reward ratio in this case is huge.
And what if stock markets around the world continue to rise? We advise our traders to open a monthly chart of the dollar/yen pair. On the large timeframe we can see that the price is ready to break through the downward corridor that has been forming since 2016. After a strong upward exit, the yen could fall quite quickly to the US$115 level.
One thing is certain. The Japanese currency is showing high volatility this year. Once again it becomes interesting for both medium and short-term traders.
08.00 German factory orders for February
14.30 Initial jobless claims in the US
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