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Start of yen withdrawal: EUR / JPY, GBP / JPY, AUD / JPY, CAD / JPY

By on October 21, 2021 0

JPY, EUR / JPY, GBP / JPY, AUD / JPY, CAD / JPY talking points:

  • The Japanese yen has been steadily declining so far in the fourth quarter, matching the theme of rates from the United States.
  • I had looked at the Yen on Monday, planning EUR / JPY pullbacks with an eye on AUD / JPY and GBP / JPY support.
  • The analysis contained in the article is based on Price action and graphic training. To learn more about price action or chart patterns, check out our DailyFX Education section.

When the Japanese Yen starts moving in a trend, it can really take on significant strength or weakness in a very short period of time, and this fully manifested itself after the FOMC’s rate decision in September.

When the Fed signaled potential faster rate hikes, along with a possible cut announcement at its next meeting in November, the rate markets began to react very quickly. As I shared in the Japanese Yen technical forecast shortly after this FOMC rate decision, this rate theme could bring back themes around the weakness of the Yen, very similar to what had been shown in the Yen. first quarter of this year.

I then chose GBP / JPY for my Top Trade for the fourth quarter, seeking to exploit the weakness of the Japanese yen by pairing it with the British pound, a currency backed by a central bank that should perhaps raise rates. even faster and earlier than the Fed. This amounted to almost 900 pips in October trading and this market remains in a very bullish state as I will see below.

But, overall, the yen seems oversold given how quickly this movement has integrated, and this can create an environment conducive to pullbacks. I had looked at this on Monday, focusing on EUR / JPY as a possible pullout candidate and it started showing with the pair over 100 pips off yesterday’s high.

But the question remains: Can the JPY cause an even deeper pullback? And if so, which markets could be the most attractive for this theme and, on the other hand, which markets are the most attractive if the weakness of the JPY returns in force?

EUR / JPY

This is the pullout candidate I looked at earlier this week, largely taken from the inference that the bullish movement was lagging behind those seen in GBP / JPY or AUD / JPY.

At this point, the pair has established a new low on the four hour chart with a move below the 14.4% Fibonacci retracement. Lower-higher resistance can be sought around this level, which is yesterday’s swing low and last week’s swing high.

Four-hour EUR / JPY price chart

Graphic prepared by James stanley; EURJPY on Tradingview

GBP / JPY

I remain bullish on GBP / JPY but the problem here seems to be timing. The pair set a new five-year high at 158.21 and despite two separate tests on Tuesday and Wednesday, failed to break through. Price action has since retreated towards trendline support, and below is a confluence area that stretches from 156.35 to 156.58.

If things really go down, deeper support with a possible invalidation of the uptrend could be sought around the psychological level of 155.00, which is roughly 25 pips above the 38.2% Fibonacci retracement of the recent bullish move. .

To learn more about Fibonacci Where psychological levels, to verify DailyFX Education

Four hour GBP / JPY price chart

Start of yen withdrawal: EUR / JPY, GBP / JPY, AUD / JPY, CAD / JPY

Graphic prepared by James stanley; GBPJPY on Tradingview

AUD / JPY

AUD / JPY was preparing for a breakout at the psychological level of 85 earlier this week, with a major level ahead at 85.81. I talked about this setup in this Monday post and the breakout set in on Tuesday with prices hitting a new three-year high yesterday.

At this point, the daily chart is working on an unfinished bearish engulfing pattern which, if today ends like this, could indicate even deeper retracement potential.

For now, level 85 is looming again but this time as possible support. Having said that, if that level kicks in today then we are probably looking at this bearish engulfing pattern which would not be ideal for setting up long positioning. This level should therefore come into play on Friday or Monday as support in order to avoid the bullish configuration in front of the impression of bearish swallowing.

To learn more about the bearish swallowing pattern, to verify DailyFX Education

AUD / JPY Daily Price Chart

Start of yen withdrawal: EUR / JPY, GBP / JPY, AUD / JPY, CAD / JPY

Graphic prepared by James stanley; AUDJPY on Tradingview

CAD / JPY

AUD / JPY and CAD / JPY currently share many similarities. And if you think about themes and drivers, it makes sense: AUD and CAD are commodity currencies and commodities have generally torn apart (with the exception of gold), and when this was associated with the short yen theme on the back of the rate premise, this resulted in very strong trends in both markets.

I had looked at the CAD / JPY yesterday, trying to chart support potential, and the first level of rating may come into play soon. But, given how it turned out, like the AUD / JPY above, a warning is in order as price action is operating on a unfinished bearish swallowing pattern on the daily chart. If it ends this way, it could be a bad signal for long positions and could instead indicate the possibility of a deeper pullback. And a very visible level for such a scenario is around the 90.00 grip, which has yet to be tested as support for the pair after last week’s breakout.

CAD / JPY Daily Price Chart

Start of yen withdrawal: EUR / JPY, GBP / JPY, AUD / JPY, CAD / JPY

Graphic prepared by James stanley; CADJPY on Tradingview

— Written by James stanley, Senior strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX

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