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Why USDJPY Traders Are Favoring Yen

May 21, 2019
BY Emma Richards

USD has been one of the most popular and consistent trading currencies in the world for well over a decade, but will this change in 2019? President Donald Trump has had a troubled history as an entrepreneur. Are such failures on repeat with his presidency? Should you trade a USD currency pair in 2019? Here’s what you should know if you are planning to trade USD this month.

April’s industrial production data and retail sales were a disappointment for USD traders, falling short on all forecasts this month. This lack of USD performance led to a rise in rate cut fears. Another rate cut would mean the Fed—once again—would take the wheel for USD and start driving market prices. We’ve seen this in Q1 of 2019, and the results speak for themselves.

From top left to bottom right, a crash is easy to recognize.

With a 3-month low against JPY continuing on a downward trend, it seems fairly clear what traders will favor in the coming days and weeks.

USDJPY short-term analysis

Technical analysis still points to a Sell order—at the time of writing this article. Fundamental analysis shows uncertainty for the US economy, which will only increase if the Fed makes rate cuts.

Global recession fears are still high and many investors see signs of another stock market “correction” on the horizon. Add to that the recent collapse of US-China trade war negotiations and the reasoning behind a Sell order seems more and more compelling.

USDJPY: The big picture

What goes up must come down, and vice versa. For the most part, that’s true, but there’s no rule that says when it should happen. Newbie traders are seeing this month’s USD downtrend and probably wondering how much lower it can go. Surely a reversal is overdue.

But when you take a step back and look at the bigger picture, the recent USD downtrend is tiny in comparison to the 2015-2016 fall. Moreover, this month’s downtrend is insignificant when compared to the prices of 2012.

Recent moves barely register on the big picture.

But what could cause USD to fall back to such levels? Some traders say a globally unpopular president is enough to send the dollar to the darkest depths. Add to that the recent US-China conflict, rising national debt, and an overly inflated US economy. We might be looking at the beginning of a USD crash already.

Trading USD this month

Similar to CHF, JPY is known to be a safe haven currency to consider during volatile times. If USDJPY is set for such a drop, a leveraged Sell order could end up being your best trade of 2019.

As always, exercise caution before investing. Trump and the Fed have ways of offsetting losses that can create temporary or overinflated price stability. Make time to investigate multiple forecasts before jumping in with both feet. Just don’t take too long.

Trade USDJPY in the long-term and short-term

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