Are we seeing a structural shift in currency market trends? Either way, the second quarter of 2022 will likely be a decisive point in the trends of currency markets for the years to come... Heres why.
A number of currency markets right now are reaching multi year highs or lows, testing historic support and resistance levels. If price were to break these levels we could be entering price levels not seen since the 1990's!
USDJPY
USDJPY is currently trading at 20 year highs and a resistance level that has held since 2002... some of you may also notice these is an inverted head and shoulders pattern on the monthly chart. This move over the past month and drive towards the current level has been driven a sharp sell off in JGB's (Japanese Govt Bonds) as seen in the chart below:
On the topic of the Japanese Bond market, the yields on these bonds are kept within a tight range by the BoJ (Bank of Japan) via Yield Curve Control (YCC), these yields are currently trading at the top of this range suggesting in normal market conditions the BoJ will step in and buy the necessary amount of bonds required to lower the yields... However as you know, we are not in "normal market conditions" considering global inflation & a war between Russia & Ukraine with potentially catastrophic consequences.
EURUSD
EURUSD is trading into 19 year lows, testing both a long term support zone and a broken trend-line. The Euro has trended negatively against the Dollar since 2008 and coincidentally the height of the financial crisis that led to Lehman Brothers collapsing.
Is this the point that EURUSD can finally find some support and break this trend or after testing this level a number of time since 2015, could we expect a return to parity between the Euro and the Dollar (1.00000)?
EURGBP
Continuing with the analysis of the Euro, this time against the British Pound. Price is testing the bottom of a range established for the past 6 years since October 2016. The past couple of months have shown consolidation but the next conclusive direction for this cross pair will be determined by geo-political outcomes of the Russian / Ukrainian war and risk appetite of investors within Europe.
Namely, any further spread of the war beyond Ukraine's borders could force investors away from European markets and consequently the Euro. While any relaxing of tensions and deescalation of hostilities will no doubt be a welcome boost for European investors.
GBPJPY
GBPJPY is trading at "Pre-Brexit" levels. The 160.000 support handle was broken upon the shock result of the UK's referendum to leave the EU, this month is the first time that price has retested this price level since that result was confirmed. However as marked on the chart we can see that the proceeding trend was established once the referendum was announced back in May 2015.
Are we now seeing a true reversal of this trend? A break above these levels will certainly give British Pound bulls impetus for an extended bullish run.
In Summary
With so many currency pairs at historic price levels we could be watching a true structural shift in global markets where traders will need to reassess their key levels, price targets and levels of risk in any open trades.
While inherently risky times for traders, with any risk comes the potential for huge rewards... any traders on the right side of the trends that come out of these levels will be in a great position to profit for a long time to come.
So its worth over the next few weeks to make some deep analysis of where markets are heading to give yourself the best opportunity to be on the right side of these trends.
A number of currency markets right now are reaching multi year highs or lows, testing historic support and resistance levels. If price were to break these levels we could be entering price levels not seen since the 1990's!
USDJPY
USDJPY is currently trading at 20 year highs and a resistance level that has held since 2002... some of you may also notice these is an inverted head and shoulders pattern on the monthly chart. This move over the past month and drive towards the current level has been driven a sharp sell off in JGB's (Japanese Govt Bonds) as seen in the chart below:
On the topic of the Japanese Bond market, the yields on these bonds are kept within a tight range by the BoJ (Bank of Japan) via Yield Curve Control (YCC), these yields are currently trading at the top of this range suggesting in normal market conditions the BoJ will step in and buy the necessary amount of bonds required to lower the yields... However as you know, we are not in "normal market conditions" considering global inflation & a war between Russia & Ukraine with potentially catastrophic consequences.
EURUSD
EURUSD is trading into 19 year lows, testing both a long term support zone and a broken trend-line. The Euro has trended negatively against the Dollar since 2008 and coincidentally the height of the financial crisis that led to Lehman Brothers collapsing.
Is this the point that EURUSD can finally find some support and break this trend or after testing this level a number of time since 2015, could we expect a return to parity between the Euro and the Dollar (1.00000)?
EURGBP
Continuing with the analysis of the Euro, this time against the British Pound. Price is testing the bottom of a range established for the past 6 years since October 2016. The past couple of months have shown consolidation but the next conclusive direction for this cross pair will be determined by geo-political outcomes of the Russian / Ukrainian war and risk appetite of investors within Europe.
Namely, any further spread of the war beyond Ukraine's borders could force investors away from European markets and consequently the Euro. While any relaxing of tensions and deescalation of hostilities will no doubt be a welcome boost for European investors.
GBPJPY
GBPJPY is trading at "Pre-Brexit" levels. The 160.000 support handle was broken upon the shock result of the UK's referendum to leave the EU, this month is the first time that price has retested this price level since that result was confirmed. However as marked on the chart we can see that the proceeding trend was established once the referendum was announced back in May 2015.
Are we now seeing a true reversal of this trend? A break above these levels will certainly give British Pound bulls impetus for an extended bullish run.
In Summary
With so many currency pairs at historic price levels we could be watching a true structural shift in global markets where traders will need to reassess their key levels, price targets and levels of risk in any open trades.
While inherently risky times for traders, with any risk comes the potential for huge rewards... any traders on the right side of the trends that come out of these levels will be in a great position to profit for a long time to come.
So its worth over the next few weeks to make some deep analysis of where markets are heading to give yourself the best opportunity to be on the right side of these trends.