Japanese Yen Crosses Closing In On Major Breakout, Will Risk Provide? Analyst picks for: 2008/12/10

Japanese Yen Cross Closing In On Major Breakout, Will Risk Provide?

Though congestion is still a common element for the risk-sensitive yen crosses, the Japanese currency is just off multi-year highs. A breakout seems immiment; but the currency's height does not guarantee it will be a bearish move. With many of the most liquid pairs carving clear wedges, a broad improvement in risk appetite could institute a major trend reversal. So, is the market destined to revive its dominant bear trend or is a trend change in the air? Our DailyFX Analysts weigh in below.

	Chief Strategist Antonio Sousa	My picks: Expertise: Average Time Frame of Trades:
I have been short AUD/JPY since the beginning of October and even though I gave back some of this trade gains I expect the Australian dollar to fall further against the Japanese yen. My reasoning for this trade is very simple. With the global economy expected to slowdown even further in 2009, the demand for commodities could dry up which could mean lower interest rates in Australia and further losses to commodity sensitive currencies like the Australian and Canadian dollars.

	Senior Currency Strategist Jamie Saettele	My picks: Staying short USDJPY, move risk to 94, target STILL below 80 Expertise: Technical Average Time Frame of Trades: 1 month
I have been short the USDJPY for the better part of 2 months now. It has been difficult to stay short because the decline has been so choppy. However, trendline resistance has held since early October. Additionally, the rally from Friday's low is clearly in 3 waves. That rally, to 93.93, is where I am moving risk to in order to lock in the bulk of the last few month's gains. By trailing the stop, we still have the opportunity to profit from an accleration in weakness that is expected by my favored count.

	Currency Strategist John Kicklighter	My picks: Short GBPJPY Expertise: Combining Money Management with Fundamental and Technical Analysis Average Time Frame of Trades: 3 days - 1 week
Short-term congestion across the currency market (and especially in the dollar and yen crosses) will have to come to an end soon as consolidation is turning to major wedges while volatility holds near the top end of its historical range. Fundamentally and technically, it makes the most sense to fall in line with the larger trend. It could be argued that a reversal in GBPJPY could be found on speculation that the outlook for the global recession and financial markets isn't as bad as previously expected. However, such a retracement would not be based on optimism and would subsequently result in a short-lived rebound risk would not improve by much. Longer-term, the bottom in the global recession is not yet within sight; and considering the lagging response from the world's consumer base, it is not likely a consideration until at least the end of the first quarter. What's more, we have not seen the much needed rebound in investor and lender confidence that could free up the credit markets and pave the way for a revival in risk appetite. A distinct reflection of the underlying fundamental implications for risk, GBPJPY price action is in a consistent bear trend and has remained so in the for months. In fact, a clear descending trendline has developed from the late September swing high which happens to coincide with the 20-day SMA. Many yen and dollar crosses are showing similar patterns; but I chose GBPJPY because it continues to forge new lows on each bear leg (while other pairs have a rising trendline that is raising the floor on price action and providing bulls an argument to hold back the tide of momentum that shorts are trying to establish). Considering I am looking at a volatile pair that is near the bottom of its multi-decade range and resistance is a moving target, entry would best be served as close to the falling trendline as possible. Furthermore, position size would need to be reduced and stops widened to compensate for the additional risk and activity.

	Currency Strategist Terri Belkas	My picks: USD/JPY range (92.00 - 93.65) Expertise: Fundamentals combined with technicals Average Time Frame of Trades: 1 - 3 days
After a few days away from the markets, I'm somewhat surprised to see most of the major currency pairs continuing to range-trade. Looking at USD/JPY, the trend remains bearish, but 92.00 - 93.65 has contained price since the start of December. This presents short-term opportunities to play the range (selling on rallies to 93.65 and buying on drops to 92.00), but any sort of jump in volatility or breakouts would negate the idea, so traders should be sure to use appropriate stops.

	Currency Analyst Ilya Spivak	My picks: Long NZDJPY (pending) Expertise: Macro Fundamentals, Classic Technical Analysis Average Time Frame of Trades: 1 week - 6 months
Having established a firm triple bottom in the 47.75-49.04 price congestion area, NZDJPY issued a hammed candlestick and then proceeded to rally for a break past downward sloping trend line resistance drawn along swing highs since late September. Positive divergence with the RSI oscillator offers confirmation. Go long at market in the 49.50-50.50 area. Set stop-loss at 47.37 below the 12/05 wick low. Target just below 57.00. For in-depth analysis of the major forex currency pairs, please see my latest technical outlook report.

	Currency Analyst John Rivera	My picks: Long USD/JPY Expertise: Fundamentals Combined With Technicals Average Time Frame of Trades: 2-4 Days
The potential bailout of the U.S. automakers may spark a bout of risk appetite which could lead to support for the USD/JPY. Additionally, there has been talk of intervention from the BoJ which could lead traders to start to pare their short positions which would also add to the bullish sentiment. Technically we see the pair near Bollinger band support which has held for the past month. Therefore, I am looking for a test of the 20-day SMA at 94.75 which has been the resistance level in the pair’s recent range.

	Currency Analyst David Song	My picks: Short AUD/JPY Expertise: Fundamentals and Technicals Average Time Frame of Trades: 2 - 10 Days
After falling to a low of 55.08 of 10/27, the AUDJPY reached a high of 70.53 on 11/4, but the lack of momentum to push higher continues to hold the pair in a downward trend. At the beginning of the week, pair made an attempt to cross above 62.85 (50.0% Fib retracement level), but the failure to break above this level favors a bearish outlook over the near-term. Over the remainder of the week, I expect increased selling pressures to drag the pair lower, and we may see the pair work its way down towards last week’s low of 57.77. Questions about these picks? Visit the DailyFX forum for a Q&A with the Analysts.