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USDJPY Approaches Monthly Ichimoku Cloud – Post Debate Analysis


Sep.27.2016

USDJPY Approaches Monthly Ichimoku Cloud

The presidential debate in the US knocked down the US dollar a bit on Monday night and now USDJPY approaches monthly Ichimoku cloud. What could make the pair break below the strong support?  Read on for Invest Diva's IDDA approach to strategy development.

USDJPY Approaches Monthly Ichimoku Cloud - Kiana Danial with Capital Index USDJPY Approaches Monthly Ichimoku Cloud - Kiana Danial with Capital Index

 

Presidential Debate Impact on Currencies

After the presidential debate Monday night, the US dollar is off its highs on Tuesday giving in for higher yielding currencies. A reason behind this could be the fact that Secretary Hillary Clinton reassured foreign nations such as Japan that the US is going to remain "good to their word" and continue their friendship, despite what Mr. Trump has been indicating. She mentioned "words matter" and indeed, the markets took the words into play right after the debate. This could potentially indicate  a favorable reaction to Clinton's debate performance.

One indicator of the presidential election outcome has been the Mexican Peso this year; which also gained strength after the debate. The Peso has taken the brunt of Donald Trump’s rise in polls, on the theory that a victory for him will at the very least result in less trades between the US and Mexico.

USDJPY Approaches Monthly Ichimoku Cloud | Technical Analysis

Let's first start by doing a long-term technical analysis on the USD/JPY monthly chart. The pair has been consolidating right above the median average, 50% Fibonacci and strong support of 100 for the past three months, after the bearish reversal which started  beginning of 2016.

 

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On the monthly chart the pair remains above the upward moving Ichimoku cloud however. So unless we see another wave of downward movements breaking below the support and the Ichimoku cloud, we could expect gradual correction aligned with the upper band of the Ichimoku cloud in the coming months.

 

USDJPY Approaches Monthly Ichimoku Cloud - Technical Analysis USDJPY Approaches Monthly Ichimoku Cloud - Technical Analysis

 

Daily Chart Analysis

The pair remains indecisive right above the 100 handle and perhaps looking for more cues from upcoming FOMC speeches and US election polls.

Short term trading strategy remains narrow within the 100 - 102.50 levels.

 

Hot Market Moving Events Coming Up...

Coming up on the economic calendar on Tuesday  we have the the Consumer Confidence (SEP) out of the US during the New York session at 2 PM GMT.

Consumer Confidence (SEP) out of the US during the New York session at 2 PM. This assessment of consumer sentiment regarding business conditions, employment and personal income by the Conference Board index has the largest pooling sample of any U.S. measure of consumer confidence, and it is expected to have dropped to 98.9 from August result of 101.1. A better than expected result could push the USD crosses up after the data release. If the data is even better than last month, the USD gains could continue for a medium-term bullish movement throughout the week.

 

>>>Breaking<<< Consumer Confidence Index surges to 104.1 in September vs. estimate of 99

 

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Invest Diva Kiana Danial Smiling Green Dress
On Wednesday we could see some trading opportunities in the CHF crosses as UBS Consumption Indicator (AUG) is released first thing at 6 AM GMT. During the New York session the high-risk Durable Goods Orders  for August is scheduled to be out at 12:30 PM GMT, expected to have dropped to -1.0% from previous 4.4%. Later watch out for FOMC member speeches at the end of New York session. During the next day’s Asian session Japan will release their retail sales at 11:50 PM GMT to create more volatility in the USD/JPY pair.

Market Sentiment - USDJPY Approaches Monthly Ichimoku Cloud

Majority of USD/JPY traders appear to be bullish on the USD/JPY which gives us a bearish signal. 85% of traders at one of the largest brokers in the US are currently long the pair. We use such market sentiment as a contrarian indicator.

 

Trading Strategy - USDJPY Approaches Monthly Ichimoku Cloud

Putting the technical, fundamental and sentimental points of the IDDA approach together, we have a very mixed outlook on the USD/JPY at the moment.

Bullish Scenario:

Only a break above the Ichimoku cloud on the daily chart could change our long-term outlook to bullish.

If you don't have a position on USD/JPY currently, you may need to wait and see depending on your risk tolerance.

 

Bearish Scenario:

A confirmation of a break below 100 could open doors for further drops towards the Ichimoku cloud on the monthly chart.

Keep in mind however that the USD/JPY pair has a habit of consolidating for anywhere between 4 to 12 months before starting a new trend, so a second long-term scenario could be side-way moves inside the Ichimoku cloud throughout 2017. Long term support levels are set at 94.50 and 87.50.

Stay tuned for market updates and signals on that my fellow invest divas.

 

 

Here are Invest Diva's calculations for important USD/JPY  approximate levels to keep an eye on:

Support Levels Turning Point Resistance Levels
95 100 105
100 105 108

 

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Kiana 喜愛成
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