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USD / JPY Violations 2016 High as APAC Traders Eye Risk-On Session


Japanese yen, USD / JPY, AUD / USD, oil, market sentiment – talking points

  • Asia-Pacific stock markets look bright at the end of the week after US stocks rose
  • Oil prices retreated overnight as NATO plans to supply more weapons to Ukraine
  • USD / JPY breaks above 2016 high, with oscillators pointing to more gains

Friday’s Asia-Pacific Outlook

Traders in the Asia-Pacific will look to end the week on a high note as markets move back to a risk-on-hold as oil prices fall and US stocks rise. The high-beta Nasdaq 100 index (NDX) rose nearly 2% in New York’s trading overnight. WTI crude and Brent crude oil prices have fallen despite a NATO rededication to provide Ukraine with more aid, as Russia’s indiscriminate bombardment of Ukrainian cities intensified despite heavy setbacks by Ukrainian forces. Those forces apparently destroyed a Russian warship this morning in Berdyansk, a port town west of Mariupol. The Japanese Yen extended its decline against the Greenback overnight, with USD / JPY rising to its highest level since December 2015.

The Australian dollar rose for a third day against the US dollar, supported by a strong set of Australian PMI figures released on Thursday. Those data strengthened the Reserve Bank of Australia (RBA) interest rate hike bets, with cash rate futures showing a rate hike as soon as the June board meeting. RBA chief Philip Lowe has slowly but steadily capitulated over a possible rate hike this year, though wage inflation has not risen as strongly as previously expected. Aussie Dollar traders will evaluate retail sales for February, coming out next week. Meanwhile, AUD / USD is likely to take its cues from broader market sentiment and commodity prices.

Japan will release inflation data for Tokyo’s March period this morning. Bank of Japan policymakers suggest that the war in Eastern Europe is likely to fuel higher prices in the Japanese economy due to higher raw material costs. However, the BOJ does not seem to have much enthusiasm yet to remove its super-comfortable policy accommodation. For now, inflation in Japan remains fairly subdued compared to other G7 economies. The dove talk saw the gap between Fed and BOJ policies widening, raising short bets on the yen in favor of the dollar. It is likely to support USD / JPY even with the currency pair at multi-year highs.

The week will conclude with a light economic event dossier. The Philippines’ retail price index for December and its business confidence in the first quarter will cross the threads. Taiwan’s consumer confidence will see an update for March. China’s current account balance for the fourth quarter is payable, and India will end the week with bank lending growth and deposit growth figures for the week ending March 11.

USD / JPY Technical Forecast

USD / JPY broke above the 2016 high overnight (121.68) after the yen weakened for a fifth consecutive day against the US dollar. That move stemmed from the 261.8% Fibonacci extension of the January high / low movement. A retreat could see the former 2016 as support. However, prices appear to be rising further, indicated by strength in the Relative Strength Index (RSI) and MACD oscillators. The 361.8% Fib expansion and the 2015 high at 125.85 are potential targets that could be hit soon if the current pace continues.

USD / JPY Daily Chart

Graph created with TradingView

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— Written by Thomas Westwater, Analyst for techlives.in

To contact Thomas, use the comments section below or @FxWestwater on Twitter

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