Yen crosses prepare for unwinds, here are the key levels
Trading Currency Crosses opens a whole new side
of the currency markets, as different crosses possess different qualities that
can suit any style of trading. Some crosses move fast and are extremely volatile
with daily ranges that may exceed over 100 pips. While other crosses move
relatively slow and exhibit low volatility, which is more suited for novice
traders.
Crosses also add another dimension to traders,
that is the ability to collect substantial amounts of interest (i.e. GBP/JPY,
NZD/JPY and other high yielding crosses) as the positive carry created by the
interest rate differentials can add to the trader’s bottom line P/L.
Japanese Yen Crosses:
1.CADJPY
2.CHFJPY
3.NZDJPY
Key Levels, Technical
Indicators & Carry Trade
CAD/JPY — Canadian dollar bulls continued push
the Japanese yen longs around as the cross remained in a vicinity of the
multi-year high of 93.84. As CADJPY continues to travel within sideways
consolidation pattern, a failure by the Loonie longs to break above the 93.84, a
2005 high will most likely confirm a reversal from these levels as the Japanese
yen bulls take over the price action and push the cross toward 91.91, a 20-day
SMA. A further move by the yen longs will most likely see the Canadian dollar
bulls retreat toward the 91.34, a 23.6 Fib of the 83.15-93.84 CAD rally, with a
further breakdown of Loonie’s defenses seeing the cross heading for the 90.39, a
level marked by the August 17 daily low. Indicators remain in favor of the
Canadian dollar traders with both MACD and momentum indicator above the zero
line, while neutral oscillators give either side enough room to maneuver. A note
of caution for perspective CADJPY traders trying to trade potential breakout to
the upside, ATR is high, signaling high volatility which is adding to the
outlook that the cross has topped out.
Key Levels, Technical
Indicators & Carry Trade
CHF/JPY — Swiss Franc longs continued to retreat
after giving up the control of the price action to the Japanese yen bulls, with
the cross sliding below the 88.00 figure, thus breaking below the formidable
Swissie defenses established by the 50.0 Fib of the 91.17-84.84 JPY rally and a
200-day SMA. A break in the support of such magnitude will most likely reinforce
the yen’s advance against the Swiss Franc positions, with CHF longs retreating
toward 86.88, a 38.2 Fib of the 91.17-84.84 of the JPY rally. A further collapse
in Swissie defenses will most likely see the cross head toward the 86.32, a
level marked by the 23.6 Fib of the 91.17-84.84 of the JPY rally. Indicators are
mixed as both the momentum indicator and MACD are above the zero line, while
oversold Stochastic favors a pullback in the price.
Key Levels, Technical
Indicators & Carry Trade
NZD/JPY — New Zealand dollar bulls remained on
sidelines as cross continued to consolidate in sideways trading with the cross
remaining confined to a 70 pips. As the trading rage begins to shrink, a
breakdown of the triangle will most likely see the NZDJPY head lower and test
the Kiwi’s bids around 76.63, a level marked by the 23.6Fib of the 70.85-78.42
NZD rally. A further break in the New Zealand dollar defenses will most likely
see the cross tumble toward 75.75, a 200-day SMA, which currently defends the
75.13, a July 7 daily low and a gateway toward the psychologically important
75.00 handle. Indicators remain in favor of New Zealand dollar longs with both
MACD and momentum indicator remaining above the zero line, while neutral
oscillators are beginning to approach overbought territory, thus raising a
cautionary flag.
We welcome you to the world beyond majors where
traders can expand their trading horizons. Please feel free to write us with any
questions and suggestions you may have at
sshenker@fxcm.com
Sam Shenker is a Technical Currency Analyst
for Forex Capital Markets (FXCM). Sam is the author of the Daily and Weekly
Technical Research reports at FXCM. His reports include: Daily Technicals,
Weekly Crosses and the Weekly Chart Pack. Prior to joining FXCM, Sam spent a
number of years on Wall St trading equities, equity derivatives and futures. He
also specialized in research and analysis of high yield bonds, corporate
bankruptcies, restructurings, reorganizations and venture capital.