Johanes
Short

JLS Trade: USDJPY Target Zone, Price Trend & Price Trend Channel

FX:USDJPY   U.S. Dollar / Japanese Yen
The USDJPY target zone was estimated to 107.00-112.00-117.00 for carry traders to carry USD currency and the USD-denominated debt securities with expectation that the Fed will continue the rate increases by the accelerated US economic growth. However, the IMF and the global central banks revised their GDP estimates to lower than previous estimation and the Fed decided to hold interest rate increase.

The global revision limit the carry traders for profit booking at USDJPY 112.00 at the central band/central ceiling at which price level the Fed and the BOJ may stabilize the price for 2.25 % by policy. However, JPY-pegged pairs derivatives already breaking their 2.25 % central parity stabilization and the USDJPY breaking the 105.50 the current estimated lower ceiling of the 2.25% stabilization rate. The price performance interior the 2.25 % stabilization consensus indicated that most carry traders have initiated their liquidation on their investment from major currencies and their denominated debt securities for profit booking.

Should the GDP estimation is continuing to be low then the USDJPY target zone may be revised to 112.00-107.00-102.00 in medium term. However, this could be confirmed if and when the carry traders not to re-carrying the USD at 107.00 in the future. At such, the 107.00 is important level to be watched to evaluate to whether the carry traders are resuming to re-carrying the USD and or the global GDP estimates consistently to down-trending.

Thus, the current short/sell trading on USDJPY limit the target to 107.00 in short term in accordance to the "price trend" and the risk (stop loss) to be managed to the "price trend channel", except the short/sell trading to be executed by single tranche and not by multiple tranches.

It should be noted however, the global GDP estimates may consistently to down-trending but and however the US economy will be accelerated as analyzed and reported by the Federal Reserve Bank of New York . And, if such condition to be confirmed then USDJPY may resumed to upward for the target zone 107.00-112.00-117.00 from the level of 107.00 but other JPY-pegged pairs under pressure to downward by their target zones. The dispute on the estimation made by the IMF and the Fed and their performance could be measured by the combination of Time Series Currency Band and the Time Series Interest Rate Differential-Based Currency Band in the future.
I just had a revelation after analyzing this pair for a bit, I believe it stay may have one more leg up that it wants to complete before going to 107, specifically to 112.8. If you disagree I would love to hear why you think so
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Johanes raovida
@raovida, by central band/parity management, the usdjpy should break 112.00 to 113.50 and then stabilized at 113.50-110.50 (2.25 %), then the pair will continue to 117.00. And what we see not to visit 113.50 and un-hold 110.50 thus mixed measurement and jpy-pegged pairs (derivative) broke their lower stabilization rate by making it frustrated in calculation. Yes, there is one more 500 PIPs to upward to 117.00 but there is also possible stop.
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raovida Johanes
@Johanes, this makes a lot of sense and am glad to see your analysis is aligned with mine once again, thanks again for all your work :)
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