Established in 1974
185,800 clients worldwide
Over 15,000 markets

Where to buy into USD/JPY?

USD/JPY has been on a strong run of late, rallying from ¥105.20 to ¥118.98 in just over a month.

JPY
Source: Bloomberg

Pullbacks have been shallow and traders have pounced on any sign of weakness. Still, with spot currently trading at ¥118.16, I feel the upside looks capped for now and indecision is currently being seen on the daily chart.

If we do see a further rally from here, I would be fading the move around the top Bollinger Band, which currently stands at ¥120.42. I am sceptical the pair can push higher, even though my longer-term bias is for a much stronger move higher.

As you can see, the 9-day RSI and stochastic oscillator are both are very much overbought and at extreme levels. So from a pure risk-to-reward standpoint, there are much greater risks of a short-term move lower. Given the news flow, which the media and IG research have detailed in some depth recently, it’s hard to see a move lower on anything other than profit taking.

Still, the question is at what level does one look to buy? My personal opinion is ¥117.63 looks like a good area to work bids into (the 38.2% retracement of the ¥115.45-to-¥118.98 move, which can be seen more clearly on the hourly chart). Stops could be placed at ¥116.30 (just under the 18 November low).

USD/JPY
Click to enlarge

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication.