Yen crosses prepare for unwinds, here are the key levels

Trading Currency Crosses opens a whole new side of the currency markets, as different crosses possess different qualities that can suit any style of trading. Some crosses move fast and are extremely volatile with daily ranges that may exceed over 100 pips. While other crosses move relatively slow and exhibit low volatility, which is more suited for novice traders.

Crosses also add another dimension to traders, that is the ability to collect substantial amounts of interest (i.e. GBP/JPY, NZD/JPY and other high yielding crosses) as the positive carry created by the interest rate differentials can add to the trader’s bottom line P/L.

Japanese Yen Crosses:

1.CADJPY
2.CHFJPY
3.NZDJPY

Key Levels, Technical Indicators & Carry Trade

CAD/JPY – Canadian dollar bulls continued push the Japanese yen longs around as the cross remained in a vicinity of the multi-year high of 93.84. As CADJPY continues to travel within sideways consolidation pattern, a failure by the Loonie longs to break above the 93.84, a 2005 high will most likely confirm a reversal from these levels as the Japanese yen bulls take over the price action and push the cross toward 91.91, a 20-day SMA. A further move by the yen longs will most likely see the Canadian dollar bulls retreat toward the 91.34, a 23.6 Fib of the 83.15-93.84 CAD rally, with a further breakdown of Loonie’s defenses seeing the cross heading for the 90.39, a level marked by the August 17 daily low. Indicators remain in favor of the Canadian dollar traders with both MACD and momentum indicator above the zero line, while neutral oscillators give either side enough room to maneuver. A note of caution for perspective CADJPY traders trying to trade potential breakout to the upside, ATR is high, signaling high volatility which is adding to the outlook that the cross has topped out.

Key Levels, Technical Indicators & Carry Trade

CHF/JPY – Swiss Franc longs continued to retreat after giving up the control of the price action to the Japanese yen bulls, with the cross sliding below the 88.00 figure, thus breaking below the formidable Swissie defenses established by the 50.0 Fib of the 91.17-84.84 JPY rally and a 200-day SMA. A break in the support of such magnitude will most likely reinforce the yen’s advance against the Swiss Franc positions, with CHF longs retreating toward 86.88, a 38.2 Fib of the 91.17-84.84 of the JPY rally. A further collapse in Swissie defenses will most likely see the cross head toward the 86.32, a level marked by the 23.6 Fib of the 91.17-84.84 of the JPY rally. Indicators are mixed as both the momentum indicator and MACD are above the zero line, while oversold Stochastic favors a pullback in the price.

Key Levels, Technical Indicators & Carry Trade

NZD/JPY – New Zealand dollar bulls remained on sidelines as cross continued to consolidate in sideways trading with the cross remaining confined to a 70 pips. As the trading rage begins to shrink, a breakdown of the triangle will most likely see the NZDJPY head lower and test the Kiwi’s bids around 76.63, a level marked by the 23.6Fib of the 70.85-78.42 NZD rally. A further break in the New Zealand dollar defenses will most likely see the cross tumble toward 75.75, a 200-day SMA, which currently defends the 75.13, a July 7 daily low and a gateway toward the psychologically important 75.00 handle. Indicators remain in favor of New Zealand dollar longs with both MACD and momentum indicator remaining above the zero line, while neutral oscillators are beginning to approach overbought territory, thus raising a cautionary flag.

We welcome you to the world beyond majors where traders can expand their trading horizons. Please feel free to write us with any questions and suggestions you may have at sshenker@fxcm.com

Sam Shenker is a Technical Currency Analyst for Forex Capital Markets (FXCM). Sam is the author of the Daily and Weekly Technical Research reports at FXCM. His reports include: Daily Technicals, Weekly Crosses and the Weekly Chart Pack. Prior to joining FXCM, Sam spent a number of years on Wall St trading equities, equity derivatives and futures. He also specialized in research and analysis of high yield bonds, corporate bankruptcies, restructurings, reorganizations and venture capital.