Dollar-Yen Forecast: "Moving Towards a Test of 104.90"


Yen exchange rates

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The Dollar-Yen exchange rate has fallen half a percent to 104.94 in mid-week trade, a move that is consistent with the view of analyst and technical forecaster Richard Perry that any strength in USD/JPY offers up a fresh chance to sell.

We continue to see near term rallies on Dollar/Yen within the near four month downtrend as a chance to sell.

The trendline falls at 105.84 today.

Yesterday’s intraday failure at 105.75 and continued downside today simply adds to the sense that the pair is moving towards a test of 104.90.

Dollar yen chart

It comes with the struggling momentum improvement also now falling over and we look to use intraday strength as a chance to sell.

The hourly chart shows initial resistance 105.40/105.60 is a near term sell zone now.

After so many weeks of “will they, won’t they?”, markets have taken one word “optimistic” from Democrat House Speaker Nancy Pelosi and run with it. We are risk-on once more.

US Treasury yields are breaking higher, with the 10 year yield above 0.80% for the first time since June, whilst this is also accompanied by a “bear steepener” on the yield curve (which is bullish for risk). We have been here before though, and this move is clearly open to potential disappointment.

Markets are taking fiscal stimulus as not “if”, but “when” and as just a matter of time now.

The US dollar is coming under growing negative pressure, with the Dollar Index falling below 93.0 for the first time in a month.

A move below 92.70 would now open a retest of the 91.75 September low (which would equate to EUR/USD testing 1.2010 once more).

Equity markets have been fluctuating in recent sessions, with repeated bull failure moves, however, once more we see futures ticking higher. Can the move hold this time?

Away from the US, we had UK inflation rebounding all but in line with expectations today, with the core at +1.3% year on year and headline at +0.5%.

A tenth of a percent miss on the consensus headline has not been enough to weigh sterling down today.