Forex Chart Patterns: New Trends in USD/JPY

Forex Chart Patterns: New Trends in USD/JPY

By Richard Cox

The CurrencyShares Japanese Yen Trust ETF (NYSEARCA: FXY) is favorite amongst currency investors looking for ways to either go long or short on the Japanese Yen.  This instrument is similar to trading forex pairs like the USD/JPY but there are differences in the fact that the FXY is expressed as a value versus a ‘basket’ of currencies.  This means that the two assets will not always move in the same direction (or at the same trajectory).  The FXY closed at 85.18 at the close of 25th January 2017 and creates new forex chart patterns in the 52-week range of 79.59 to 96.75.

The fund holds Japanese Yen in a deposit account to provide exposure in the currency, and the popular forex ETF had moved from ~80 to current level of ~85.18, implying a rise of 6 percent for the year.  

Forex Market Factors

The 2016 saw a stupendous rise in oil prices, also the BREXIT had created a ripple in the forex market affecting all the major currencies of the world including Yen. The GDP had been declining in Japan along with its “Abenomics” of keeping the interest rates at the record low level of 0.1 percent to fuel the growth has put considerable pressure on the export-reliant Japanese currency, the Yen.

Also, at the United States, the Federal Reserve had raised rate providing a momentum to already stronger US Dollar against all the currencies. These factors have played their role in strengthening the US dollar and weakening of the Yen, giving a better than debt return from the FXY.

USD/JPY: Japanese Government Influence

The continuation of the Japanese government’s target of keeping 10-year bond yield at record zero level in 2017 will continue to pressure the Yen in FY 2017. Also, at home front, the newly elected president with his Nation First policy will provide the much-needed impetus to the local industries and in turn help the GDP growth in the United States.

Other geopolitical factors like BREXIT will also aid the strengthening of the US dollar against all the currencies. The factors discussed above will have a positive impact on the USD and a negative effect on the Japanese Yen. This scenario is suitable for the investors who wants to take a short call on the Japanese Yen, and the best way to do so is to invest through the FXY ETF.

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