Is it time to consider the possibility of a long USD / JPY?

The yen appears to be investors’ preferred hedge against euro declines before the first round of France’s presidential election on Sunday, judging by risk-reversal rates. The one-month measure for the euro against the yen fell this week to the lowest level since January 2009, while a similar measure for the common currency against the Swiss franc hasn’t gone beyond levels seen less than a year ago. One reason for elevated hedging may be Japanese investors seeking protection for their French bond holdings.

The mid-term short shows yen purchases used for hedge due to the French elections and geopolitical risks.

We can see trend  reversing formation Headers Shoulders that gives us the first signal of possible purchases of USD / JPY.

Broken Neck line of the figure and test – classic movement.

The break is made by a strong bullish bar with a large body, the next few correction bars are small within the bullish bar, we do not have the price down below it – the formation is still bullish.

What we can do if we want to trade a possible reversal here is to wait for a slightly better price around 109.10 and small stop near 108.56 or larger about 107.95

CCI (50) has passed over 0, which also gives signals of a possible rise, but of course risky because we have to trade against the medium-term downward movement.

Alternative Scenario: Passing  of the the price below 1.08 will increase the likelihood of a new downward movement.

Стефан Д. Ангелов – Head of Stocks Trading