The start of 2021 we kick started our year with a USDJPY long trade idea.
This analysis has been extremely powerful and has since reached prices of 110 previously being 104.
The fundamentals were aligned and on track for a bullish move which was realised in the past few months.
However, now it' April we have another update that potentially USDJPY has some further steam and power to the move.
There are some key reversal signs that we need to keep an eye on to be safe.
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Logikfx Forex Opportunity Rankings
We can see at a very high level that USDJPY is at the top of the list meaning it's one of the best possible ideas right now considering our economic variables.
Overall, it shows that we should be bullish on USDJPY as all the green arrows signal a bullish outlook and the red arrows signal a bearish outlook.
We'll need to use a bit of discretion to determine if this is true further in this analysis.
Macro Currency Strength Meter - Logikfx
We can see on the currency strength meter some interesting behaviour.
Mainly that the strength of the USD recently hit a negative region but instantly bounced back into a positive side, could this be start of fundamental strength again?
On the flipside JPY had strength during mid march but has now become fundamentally weaker.
This creates our bias now to be bullish on USDJPY.
Gross Domestic Product Differentials
The Gross Domestic Product differentials are forecast for 2022 to be in favour of a bullish USD.
We can see the change in GDP differentials to be quite positive at 0.4% meaning US is looking to outgrow JPY in 2022.
Overall, the GDP differentials agree with out bullish outlook from the currency strength meter which is great.
USDJPY Trade Analysis (Import/Export)
When analysing Exxon prices vs USDJPY we didn't find any conclusive results.
Exxon prices have stayed fairly flat since march.
Overall, we have a neutral outlook analysing just Exxon alone.
We'll need to see what the next two companies say about USDJPY to see if there's any bias we can get.
WTI the crude oil prices are another indicator we've analysed.
Very similarly to the Exxon prices, the price of the commodity have stayed the same.
You can see how Exxon prices are heavily impacted by the prices of oil itself as both hovering similar prices!
Again, no bias on this one.
Finally we're considering the Toyota prices against USDJPY to see if there's any correlation.
We can see a very strong positive correlation between the two as Toyota prices rise as does USDJPY and vice versa.
What's interesting now is that Toyota prices have been climbing significantly since around February last year. However, USDJPY prices haven't had the growth until the past couple months.
We'll see if this trend continues or not as this month there's been a slight dip in Toyota prices.
Overall, the trade analysis there's no solid conclusion.
We will need to keep an eye throughout this month on the 3 companies/ commodities mentioned to make sure we've got extra confluence.
Stock Market Analysis (S&P500)
The stock market has had incredible growth in the past year especially, the S&P500.
We've seen the market grow over 25% since the recent high seen at the start of 2020.
Now that it's 2021 markets are see new big highs!
Are we in a bubble or are we going to see further growth?
Overall, this growth is bullish for USDJPY as the US is seen more wealthy.
Net Interest Rate Differentials
Interest rates are one of the final indicators we're considering.
Overall, the interest rate differentials are in favour of United States and thus the USD.
Japan have been holding negative interest rates since 2016.
You could say they're a few years ahead with other countries looking to now adopt similar policies.
Overall, bullish signals on interest rate differentials alone!
Hedge Fund Positions (COT REPORT)
The net hedge fund open interest found on the COT report is a great sentiment indicator in the markets to consider.
What we've identified is that there's been a positive net hedge fund open interest differential.
Meaning in this case hedge funds are selling JPY more than USD.
What we need to keep an eye on is the peak we're seeing in the green line.
In the past this level of open interest has seen reversals in market sentiment which can further be seen in reversals in price so keep a close eye on this indicator!
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USDJPY Price Trends
Overall, the prices have had super strong bullish power since our original analysis in Jan 2021.
Prices since then have not had any selling power.
We're now getting to levels of potential resistance so what I'd like to see are potential retracements in price followed by any bullish signals in price.
Keep an eye on this one as we may be in for further upside movement if markets continue a risk on sentiment.
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