Trade Ideas/USD/JPY

USD/JPY: Weekly outlook November 19th

     USD/JPY has a very formidable bullish feel to it and the market has been itching to buy this pair for months (if not years). We are sitting close to historic lows in USD/JPY and the upcoming general election (December 16th) has the Yen bears very excited. If the LDP were to win an overall majority (unlikely) they would probably instigate a period of unlimited easing in order to get out of the current deflationary spiral.

This could be a case of buy-the-rumour-sell-the-fact for the next 4 weeks but the market can move a long way in 4 weeks! The attached daily chart shows that bulls should be cautious near current levels, with a 61.8% retracement currently capping, but when the market gets excited you can start throwing the technical analysis handbook out the window. The economic calendar will also be interesting with BOJ minutes from the last meeting on Monday and the two-day policy meeting ends on Tuesday. If they are clever, the BOJ will add some fuel to the bearish-Yen fire and achieve their weaker-Yen objective without intervention. Buy dips here and add on bullish breaks is my bias.

In EUR/JPY, the big level to watch this week will be 104.80, which is the 61.8% retracement of the 5-wave down-move from 111.40 to 94.10.

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