Strategic trade
Trade view / 17 August 2016 at 8:41 GMT

#SaxoStrats: Dollar to decimate softening yen

Head of FX Strategy / Saxo Bank
Instrument: USDJPY
Price target:
Market price:

We are buying USDJPY on bullish reversal after the break below 100.00 was rejected.

The US dollar saw a brief meltdown through key support levels in a number of USD pairs on dovish rhetoric from a couple of peripheral Federal Reserve officials, before the more influential New York Fed’s Dudley and another Fed official made hawkish comments pointing to high odds of rate increases at coming Federal Open Market Committee meetings.

 We see US bond markets at a key support levels after an ugly selloff yesterday and a break lower (yields higher) could act as a significant JPY negative as Japanese investors could unwind hedges on foreign bond purchases.

Technically, we have a bullish reversal in the action as pointed to in the chart commentary below.

It’s hard to see why Dudley would come out with clearly hawkish language pointing to rate hike risks at coming meetings if didn’t believe that Fed chair Janet Yellen also supports this view. It should also be noted that the Brexit has not only failed to trigger any global market contagion, but US equities traded at all-time highs this week. 

Yellen’s speech next Friday at the Jackson Hole Fed Conference could be critical in this regard.

The market may be unwilling to challenge the 100.00 level again before the Bank of Japan meeting on September 21, leaving a large range to explore to the upside in the meantime.

USDJPY (daily):

The reversal back through the 100.00 level and even the local 100.70 prior low takes the focus back higher for the bulls as a false break lower is suggested. The next key development will be a break into the Ichimoku cloud (that level changes dynamically) and the top of the cloud near 105.00. Less aggressive traders may look to take partial profits around these levels and re-enter on retracements. A solid rally from here would also confirm the evidence of momentum divergence in the MACD indicator.

Source: Saxo Bank 

USDJPY (weekly):

Create your own charts with SaxoTraderGO click here to learn more

Source: Saxo Bank 

Management and risk description

The stop is rather closely placed relative to average trading ranges and could be triggered on ad hoc developments. The FOMC minutes are ahead tonight and could show a sufficiently dovish bias in the policy discussion to warrant a USD selloff as the market seems highly susceptible to signals in what appears to be a nervous, somewhat thinly traded summer market. 


Entry: buy in 100.60-90 range.

Stop: 99.85.

Target: 106.80.

— Edited by Michael McKenna

For more on forex click here.

Non-independent investment research disclaimer applies. Read more
izwansamba izwansamba
Hello sir. im izwan from malaysia. I dont understand this part , can you explain it? Tq. ---> We see US bond markets at a key support levels after an ugly selloff yesterday and a break lower (yields higher) could act as a significant JPY negative as Japanese investors could unwind hedges on foreign bond purchases.


The Saxo Bank Group entities each provide execution-only service and access to permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on or as a result of the use of the Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer
- 沪ICP备13028953号-1

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail