Forex FOREX PRO WEEKLY, July 11 - 15, 2022

[Venelin]

Morning everybody,

Today we turn to a bit specific cross-market analysis and take a look at JPY long-term chart. Fundamentally, JPY is very weak currency by three reasons. First is - QE programme. While all other G7 countries turns to tightening, Japan keep going with money printing and easing policy, providing more and more liquidity. Second is very specific bond market. Japan has 200+% Debt/GDP ratio and in fact no foreign market investors, the major part of national debt is held by BoJ.
Finally, the third reason, Japan now is loosing trading balance surplus and has difficult time as export-oriented economy because of commodities price jump. These three factors suggest continuation of downside trend on JPY.

We suggest that it should reach major OP target around 145 area. At the same time, right now market is coming to all-time 5/8 resistance around 139 and at the same time is completing 1.618 butterfly target around 142. In short-term this combination (maybe together with intervention, who knows) could provide background for tactical retracement. So, if you intend to take position - you could wait for this pullback:
View attachment 78326

But it is not all yet. Take a look at GBP/JPY chart. It also confirms that JPY should become weaker as the shape is very similar to USD/JPY and also has few targets above the market:
View attachment 78327

Supposedly GBP/JPY targets should be reached in the same moment as 145 OP on USD/JPY charts. But this is not all yet. Take a look that GBP/JPY target stands significantly lower than the previous top, while on USD/JPY chart it stands higher. Thus comparison suggests that GBP should keep dropping against USD in near term. Thus, our suggestion of downside breakout of 1.14 area on GBP/USD has cross-market background as well.
Thus, cross-market analysis sometimes might be very useful...

USD/JPY is very overbought on monhtly chart. Also very good conditions for potential BnB/DRPO patterns forming...Also 10y to 2y spread is inverted and reaching breaking point

 

[RahmanSL]

Morning everybody,

So, as we've discussed few months ago in our weekly reports - Fed rate change doesn't help to control inflation, it should keep going higher, because the reasons for it are not monetary, they are structural - big disbalance between demand and supply in national economy.

Thus, I suspect that we could stay focused on 1% rate change on nearest meeting. And also we should say "hello" to C. Lagarde with her 0.25-0.5% rate change. EU inflation with such a policy very soon start tending to 15-20%. Thus, no doubts that EUR should keep going lower and now I'm even start to think that my 0.9 target starts looking conservative.

We do not have something really interesting on the chart. Market is coiling around the parity, but I suspect, mostly because of oversold on weekly chart, that supports EUR. But this is not for too long.
View attachment 78312

On 4H chart I would watch for DRPO Failure, which, in fact, already stands in place, and for downside continuation. Retail Sales also hardly will be positive today...
View attachment 78313

That's being said - keep shorts if you have it, watch for new ones. No longs by far.

Hi Sive... yes, I am keeping my EUR/USD shorts until after FED's expected rate hikes which some said might be 1.000bsp which is not good for the Euro.

 

[RahmanSL]

A textbook example of a calculation using cross analysis.
Thank you for that.
Only in the case of USDJPY, I am worried about what will happen when the recession in the USA takes full effect. Will the JPY manage to reach 145 without the safehaven taking effect?
Or am I a few miles ahead in my thinking again.

I am thinking along that line too...but will stick with shorting EUR/USD for now.
Anywhere, grandma Yellen said she had not "discussed" with BOJ on possibility of bank intervention on "worrisome" weak Yen, but then, how would we know when we were not there with them.

 

[Sive Morten]

A textbook example of a calculation using cross analysis.
Thank you for that.
Only in the case of USDJPY, I am worried about what will happen when the recession in the USA takes full effect. Will the JPY manage to reach 145 without the safehaven taking effect?
Or am I a few miles ahead in my thinking again.

Yep, timing here is a vital thing. I have two thoughts on this subject. First is -7-10 points now is not a big deal as market is already around 140. Second, the US crisis hardly makes economy conditions in Japan better, so JPY with solid bearish momentum will need some time for adaptation.