Hedge Set-Ups: Japanese Yen Gaining Steam?

The Bank of Japan have an ultimate goal with their currency – and that is to keep it WEAK! However, there is so much you can do as a central bank to sustain this. The Bank’s governor, Kuroda had announced earlier this year, that their stimulus program would have to end, however no specific time was given. Economists and analysts alike have highlighted the imminent increase in inflationary pressure and that in effect will drive more strength in the Yen.

Another fundamental drive for a plausible Yen strength, is the trade war between the US and China – China just announced a 25% tariff on goods from the US as a response to the $50billion tariff slapped by the Trump administration on imported Chinese goods. Risk aversion is currently seen to have driven investors to the Yen as a safe-haven. Hence, causing a push downwards in some Yen crosses on the shorter term; the EUR/JPY fits this narrative – the EUR/JPY has shown a lag in its movement compared to other yen crosses amidst a current weakness in the Yen. Technically, its path to drive upwards is faced with several plausible significant resistance zones, a good place to buy the Yen [see H1 Chart – EUR/JPY].

Fig 1: Hourly (H1) EUR/JPY Chart

It should be noteworthy that the longer-time outlook for the Japanese Yen is bearish and some majors have shown corroborating strength on the shorter term: the NZD/JPY is a major culprit [see m15 chart – NZD/JPY].

Fig 3: 15-Minute (m15) NZD/JPY Chart


AGGRESSIVE: Bulls can look to go long at current market price (instant execution) with stop-loss set at 76.960 with take profit set at 77.910.

N.B: The aforementioned are hedge set-ups that should help mitigate risk. However, they are aggressive and traders with low risk threshold can sit this one out. The fundamentals with the trade war can cause spontaneous swings and volatility in price movement that might go against theses setups, hence its imperative that traders always use a stop-loss!!

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