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The forex market has taken some relief as news has emerged of a meeting between Trump and China in October. JPY safe haven appeal is down, momentarily.  We are going to take you through some forex market analysis for the USDJPY.

Leading into Q4, generally speaking spending increases leading into a positive ‘Santa-clause rally’. 

Looking at the USDJPY, for the last 5 years, Q4 has provided a great buying opportunity with an increase of anywhere between 400-1800 PIPS over the 3-4 month period. The pair are now re-testing the bottom of the triangular formation.

USDJPY – Q4 Rally

Todays economic climate is very different to the ones seen over the last 5 years as recession indicators have been flashing red throughout 2019. The FED have now increased the chances of a recession to similar levels seen back on 2007/08.

The trade war is also very unpredictable with Trump being extremely active on Twitter. His tweets are providing large swings and unpredictable moves not only in the currency market but also for the US stock market. 2019 has seen the JPY strengthen across all major currencies and we are now at a cross roads.

It was only 1 week ago when the USDJPY had momentarily broken the major support of 104.80. This level hadn’t been breached since the financial scare in 2016. The pair have now recovered, and appears to be waiting for some major economic announcements before choosing its direction.

USDJPY – Daily Charts- retesting the triangular formation

The USDJPY is now trading at the 50EMA which is also the same level as the triangular formation. A break above 107.60 could see the pair return to 108.00 and possibly 109-110 over the Christmas period. However, a rejection from this level could see the pair back down at 105.00.

All fundamental analysis is suggesting further downside: The US bond yield curve which has predicted the last 5 recessions is signalling alarm bells, manufacturing index’s are in a contraction phase globally, China’s exports and imports are continuing to decline suggesting a reduction on global demand, US jobs created continue its decline, Central Banks are racing to cut interest rates globally, negative yielding debt is at all time record highs!

Thats right, people investing to get a negative yield is at an all time record high!

Therefore you can see our concern leading into Q4. History would suggest we could see a ‘Santa clause rally’ and a potentially breakout to the upside, especially if the China and US meeting goes ahead in October. However, unless there is a trade agreement, we could see further strength of the JPY. A break back below 106.60 could see the pair continue towards low 105.00.

USDJPY – 1 Hour Time Frame

What to watch out for: A break above 107.60 with continuation to 108-109, or a break below 106.60 with further downside to 105.00.

This is one to keep a close eye on that’s for sure!

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