The big question for Forex traders is whether or not the turmoil in
equities and in emerging market currencies has eased. If it has, then focus can
return to such matters as the effects of the proposed gradual tapering of US
Quantitative Easing. This will be positive for US dollar longs. One irony is
that if this is the case, a significant factor will have been two successive
disappointing Non Farm Payrolls reports, for December 2013 and January 2014.
Tomorrow, Tuesday, Janet Yellen, the new chair of the Federal Reserve,
will go to the Congress to give the Fed’s stance on economic conditions and
policy. This is eagerly awaited as it is her first such event since becoming Fed
chair. Yellen has in the past been in favour of QE but she is joined on the
Federal Reserve by a number of new voters, such as the chairman of the Dallas
Fed, Fisher, who has made it plain that they are strongly in favour of
tapering, and the sooner the better. Fisher is a Texan and that is presumably
why, even if he does not eat barbed wire for breakfast, he feels it necessary
to make it sound as if he does. See “New Fed voter in favour of aggressive
tapering”.
Forex trading
thoughts: The Japanese Yen
On Friday last the Japanese Yen demonstrated a Technical Analysis
pattern that might seem to suggest that its recent strength against the US
dollar could be coming to an end. This would be consistent with the
Fundamentals of a possible alleviation of the emerging market turmoil, which
drove investors into the Yen as a safe haven. If the disorder in EM and equities
has actually died down then the Yen will, once more, be subject to the
principles of Abenomics, so called because they are the brain child of the
Japanese Prime Minister, Shinzō Abe. These policies are designed to weaken the
Yen.
The Japanese have had more than enough bad experiences of deflation. If this
phenomenon is now exercising the minds of western Central Banks, it can be
expected to be even more in the thoughts of the Japanese. This is a further
argument for the continuation of current Japanese monetary policy.
The four hour chart for USDJPY above has carved out a double bottom and
a higher high. Higher highs and higher lows indicate a rising trend.
When the Yen weakens the USDJPY pair goes up. For the reasons set out
here we will be setting the Silver Trigger routine to take a long trade in this
pair in the event of a pull back to or below 101.772. The trade will be negated
if price falls to or below the previous low (the level of the double bottom). Depending
on momentum in the pair over the coming sessions, we may even decide to act
before a pullback to the level indicated.
Important disclaimer: None
of the commentary here constitutes investment advice. It is for educational
purposes only. There are many countervailing views on the way the market might
move and no one, not us or anyone else, can foretell the future. You should
only trade with money you can afford to lose. It is important that you make
money management and the control of risk the cornerstones of all your trading
activity.
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