Care to guess what is the best performing major currency in 2018? Chances are you will say that it’s the US Dollar. Although US Dollar is doing pretty well this year, the best performing currency is in fact the Japanese Yen. You can see in the table below that despite the Dollar Index rallying 4.9% as of Dec 27th, the Yen has outperformed the U.S Dollar by 1.43%. We can also see the U.S. Dollar has rallied against all the other major currencies, but the Japanese Yen has rallied even at a greater percentage against the same currency. For example, EURUSD has dropped 5.08%, meaning that U.S Dollar has rallied 5.08% against European Dollar this year. However, EURJPY dropped 6.5%, which means that Japanese Yen has rallied at a greater percentage against the European dollar.
The market as always is a discount mechanism and it discounts events several months and years in advance. The BOJ (Bank of Japan) has embarked in a massive quantitative easing since 2013 and it’s the only major central banks that still maintains the program. The Fed has started to unwind the quantitative easing and normalize the balance sheet while the ECB has stopped the program.
BOJ is caught in a conundrum. The 2% inflation target remains as elusive as ever, and the recent selloff in Oil should further damp the outlook. BOJ Governor Haruhiko Kuroda admitted that BOJ must weigh in the negative cost of prolonged monetary easing. For example, it can hurt financial institutions’ profits and discourage them from boosting lending. The change in attitude underscores the rising hurdle for meeting BOJ’s price goal. Minutes of the October rate review shows a rift within the BOJ as board members disagree on the prolonged easing.
Last month, Kuroda also said that Japan no longer needs to “decisively implement a large-scale policy to overcome deflation.” This is perhaps the most specific hint that BOJ is preparing to exit from the most aggressive quantitative easing experiment. Couple this with the Fed’s rate hike path running out of steam, the Yen likely can continue to get stronger in 2019. This is the scenario where BOJ reduces stimulus as the Fed pauses. An anticipated end to BOJ’s negative interest rate policy in 2019 should make the yen more attractive.
Below we will take a look at Elliott Wave outlook for two Yen crosses: GBPJPY and EURJPY. We will check to see what the technical tells us about the outlook for Yen pairs in 2019.
GBPJPY Daily Elliott Wave Outlook 12.27.2018
GBPJPY Daily Elliott Wave chart above suggests that cycle from 2.2.2018 high shows an incomplete bearish sequence towards the target of 129.1 – 133.06. This view is valid as far as pair remains below 9.21.2018 high (149.78) which is the invalidation level. The decline from 2.2.2018 high is a textbook 7 swing double three Elliott Wave structure (WXY) This chart confirms that Japanese Yen will continue to outperform against Pound Sterling in 2019.
CADJPY Daily Elliott Wave Outlook 12.27.2018
CADJPY Daily Elliott Wave chart above also shows that cycle from 9.15.2017 high shows an incomplete bearish sequence towards the target of 75.49 – 78.11. This view is valid as far as pair remains below 10.3.2018 high (89.18) which is the invalidation level. The decline from 9.15.2017 high is also 7 swing double three Elliott Wave structure (WXY). The first leg Primary wave ((W)) unfolded as a Flat Elliott Wave structure (A)-(B)-(C) with 3-3-5 structure. This chart confirms that Japanese Yen will continue to outperform against Canadian Dollar in 2019.
In conclusion, both GBPJPY and CADJPY Elliott Wave outlook confirms the thesis that Japanese Yen can continue to outperform. The market price action has spoken and the current strength in Japanese Yen discounts the future in which BOJ reduces stimulus and the Fed pauses the rate hike.
Become a Successful Trader and Master Elliott Wave like a Pro. Start your Free 14 Day Trial at - Elliott Wave Forecast.
FURTHER DISCLOSURES AND DISCLAIMER CONCERNING RISK, RESPONSIBILITY AND LIABILITY Trading in the Foreign Exchange market is a challenging opportunity where above average returns are available for educated and experienced investors who are willing to take above average risk. However, before deciding to participate in Foreign Exchange (FX) trading, you should carefully consider your investment objectives, level of xperience and risk appetite. Do not invest or trade capital you cannot afford to lose. EME PROCESSING AND CONSULTING, LLC, THEIR REPRESENTATIVES, AND ANYONE WORKING FOR OR WITHIN WWW.ELLIOTTWAVE- FORECAST.COM is not responsible for any loss from any form of distributed advice, signal, analysis, or content. Again, we fully DISCLOSE to the Subscriber base that the Service as a whole, the individual Parties, Representatives, or owners shall not be liable to any and all Subscribers for any losses or damages as a result of any action taken by the Subscriber from any trade idea or signal posted on the website(s) distributed through any form of social-media, email, the website, and/or any other electronic, written, verbal, or future form of communication . All analysis, trading signals, trading recommendations, all charts, communicated interpretations of the wave counts, and all content from any media form produced by www.Elliottwave-forecast.com and/or the Representatives are solely the opinions and best efforts of the respective author(s). In general Forex instruments are highly leveraged, and traders can lose some or all of their initial margin funds. All content provided by www.Elliottwave-forecast.com is expressed in good faith and is intended to help Subscribers succeed in the marketplace, but it is never guaranteed. There is no “holy grail” to trading or forecasting the market and we are wrong sometimes like everyone else. Please understand and accept the risk involved when making any trading and/or investment decision. UNDERSTAND that all the content we provide is protected through copyright of EME PROCESSING AND CONSULTING, LLC. It is illegal to disseminate in any form of communication any part or all of our proprietary information without specific authorization. UNDERSTAND that you also agree to not allow persons that are not PAID SUBSCRIBERS to view any of the content not released publicly. IF YOU ARE FOUND TO BE IN VIOLATION OF THESE RESTRICTIONS you or your firm (as the Subscriber) will be charged fully with no discount for one year subscription to our Premium Plus Plan at $1,799.88 for EACH person or firm who received any of our content illegally through the respected intermediary’s (Subscriber in violation of terms) channel(s) of communication.
Recommended Content
Editors’ Picks
EUR/USD trades weak below 1.0800 amid Good Friday lull, ahead of US PCE
EUR/USD remains depressed below 1.0800, as traders lack directional impetus amid minimal volatility and thin liquidity on Good Friday. The pair keenly awaits the US PCE inflation data and Fed Chair Powell's speech for fresh hints on next week's price action.
GBP/USD holds steady above 1.2600 as markets stay calm on Good Friday
GBP/USD trades sideways above 1.2600 amid a typical Good Friday trading lull. A broadly firmer US Dollar could keep any upside attempts limited in the pair ahead of the US PCE inflation data and Fed Chair Powell's appearance.
Gold ends Q1 2024 at record highs, what’s next?
Gold is sitting at an all-time high of $2,236, lacking a trading impetus amid holiday-thinned conditions on Good Friday. Most major world markets, including the United States are closed in observance of Holy Friday, leaving volatility around Gold price highly subdued.
Ripple's move above this key level could trigger nearly 50% rally for XRP
Ripple price has overcome a critical resistance level and flipped into a support floor on the weekly time frame. This development happened while XRP tightly consolidated for roughly 250 days.
US core PCE inflation set to ease in February on month as Federal Reserve rate cut bets for June mount
The core Personal Consumption Expenditures Price Index is set to rise 0.3% MoM and 2.8% YoY in February. The revised Summary of Projections showed that policymakers upwardly revised end-2024 core PCE forecast to 2.6% from 2.4%.