Currency Wars Flamed as Japan Called Out at G7: USD/JPY + NIKKEI225 Levels

May 23, 2016

Image: Pexels

Currency Wars Flamed:
A quiet start to the week follows on from two days of G7 meetings, picturesquely set in the north of Japan.

The meetings focused around the usual narratives we have been following on the Vantage FX News Centre, including those of global growth, security, migration and of course the one on everyone’s lips, Brexit.

One interesting sound bite to come out of the weekend’s meetings is the obvious tension that isn’t going away between nations struggling for supreme weakness in the currency wars. Led by US Treasury Secretary Jack Lew, the rapid devaluation of the Japanese Yen has once again garnered special attention at the G7:

“It’s important that the G7 has an agreement not only to refrain from competitive devaluations, but to communicate so that we don’t surprise each other.”

The Japanese finance minister Taro Aso played down the reported confrontation, but behind closed doors would have been seething.

Moving forward, and having talked about the suddenly more hawkish Fed speakers putting a rocket under the US Dollar and pushing USD/JPY above 110.000 just last week, attention now shifts to the evolving narrative on the side of the Japanese Yen.

USD/JPY Daily:
160523_usdjpy_daily
Click on chart to see a larger view.

We’ve got this nice, bearish pattern where price is stepping down between support and resistance levels. Highlight the daily candles that are forming on the 110.000 retest on your own MT4 charts and you can see the indecision price is showing with the doji type candles forming right on the level.

This sort of price action alone doesn’t necessarily mean that a reversal is coming, but rather just highlights indecision and the importance of the level.

USD/JPY 4 Hour:
160523_usdjpy_4hourblog
Click on chart to see a larger view.

But zooming into the 4 hour chart and putting on the most obvious trend line, brings up a nice confluence of resistance which we can manage our risk around from the short side if that’s the direction you want to look to play from.

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Charts of the Day:
Keeping with today’s Japanese theme, we move across to one for the Indices traders, taking a look at the NIKKEI 225.

NIKKEI 225 Daily:
160523_nikkei225_daily
Click on chart to see a larger view.

While chopping through this level both up and down a few times, this daily horizontal level is still worth keeping an eye on for mine. You can see, even though it has been chopped through, it has always been a point of interest for price, still bouncing and retesting multiple times throughout.

The most recent price action has seen price break through and then retest the level as support as it tries to kick higher.

NIKKEI 225 Weekly:
160523_nikkei225_weekly
Click on chart to see a larger view.

Although the daily horizontal support/resistance line I have highlighted isn’t subjective, the weekly bullish trend line on the other hand is. You can have a play with drawing that one from a few different obvious points yourself and see that slight changes have a big impact on how bullish/bearish the chart actually looks.

One thing you can’t say is subjective on the higher time frame, is that price is in an overall, longer term bullish trend. Definitely something that should be taken into account when attacking the Indices markets.

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On the Calendar Monday
CAD Bank Holiday

Victoria Day is a federal Canadian public holiday celebrated on the last Monday preceding May 25, in honour of Queen Victoria’s birthday.”

Keep an eye on the @VantageFX Twitter account as we look to share some possible intra-day setups. Trade with leading ECN Forex Broker, Vantage FX by taking advantage of levels on your own live Forex account.

Dane Williams – @VantageFX

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