An idiom which clearly describes the situation which has now been going on for months with the US dollar against the Japanese Yen is “one step forward, two steps back”. Fed Chair; Janet Yellen stated in regards to the rate hike took the US dollar and Japanese Yen pair last month from 105.54 to 111.44.
The US dollar however has lost momentum against the Yen once again. It seems at the moment that the US Dollar and Japanese Yen pair will reach the range of 101 to 103, here are the reasons why:
The preliminary data provided by the ISM (Institute for Supply Management) that the expansion of the manufacturing activity was more than expected by the analysts. The reading came in higher than the reading of April, it came in at 51.3 as opposed to April’s 50.8 as well as against the estimate of the Street which was 50.4.
The construction spending data did however show a 1.8% decline in April. The decline is the steepest that has been seen in the last five years. A 0.5% rise in construction spending during April was expected by analysts.
A separate survey demonstrated that for the fifteenth month in a row the manufacturing activity contracted in China. Therefore Europe’s situation is not at all different. Germany’s final manufacturing PMI was 52.1. The reading was factored in below the consensus estimate which was 52.5.
Concerns in regards to the prospects of a rate hike during June are now present due to the mixed data. The Prime Minister Shinzo Abe postponed the plan in Japan for an increase in sales tax by two and a half years. Therefore and fundamentally the US dollar and Japanese Yen pair is expected to keep at the downtrend throughout the following weeks.
It is indicated on the long term chart that there has been a drop in the stochastic, it is below the reading of fifty, this has not happened for quite a few years. This is an indicator of the fact that the US Dollar Japanese Yen pairs downtrend is headed for the long-term. A resistance at 111.50 is indicated by the monthly chart. The movement of this currency pair continues to be in the declining channel. The major support which is next is in existence at the 101.50 levels.
Therefore a currency trader may take into consideration a short position close to 109.50 with their stop loss being at 112. A Forex trader should exist from the short position when this currency pair comes into the support zone around 101.50 to 103. The risk ratio carried by this trend is of 1:3.
A one touch call option can be picked up by a binary trader in the US Dollar Japanese Yen currency pair. You can even buy a ladder put option being as a steep decline in the US Dollar Japanese Yen pair can be expected.
All the popular binary brokers will always offer the US dollar Japanese Yen pair. Therefore a trader will not be without options when choosing an expiry date and a strike price. The put option strike price recommendation is 105. A favorable expiry date for the trader will be in the last week of June.