The YEN Week - A big DeepSeek related spike in early trade
THE YEN WEEK - BIAS IS BULLISH
Expected USD/YEN trading range is 151.00 - 155.50.
We talked on a host of negatives at Europe's Open, ie Trump and tariffs on Colombia, the AI model from China’s DeepSeek may disrupt the tech market (DeepSeek unveiled an updated AI model last week that it says is competitive with OpenAI’s technology) and China's PMIs slipped ahead of Lunar New Year holiday in January.
A long market has come under immediate pressure and lost over 200 points already in Europe with contacts talk of sell stopping through 154.75 to a new six week low of 153.90 on heightened risk aversion.
A long USD market is broadly softer through the week's fist big move.
RISK 1 - RISK basically and the possibility/likelihood that continued market uncertainty leads to further position paring and increases the appeal of the safe haven YEN.
RISK 2 - On the domestic front and after last week's balanced +0.25% BOJ rate hike, while substantially raising inflation expectations (CPI at 2.4% in 2025 vs 1.9% previous estimate) and the spike in Japan CPI in December(3.6% y/y vs 2.9% last) attention will turn to Tokyo CPI for January Friday. Prices are seen rising 3.0% y/y, but after recent developments will there be topside risk?
The Minutes of December's MPM and the BOJ's Himino are scheduled on the central bank front. See bottom middle of the Dashboard. Implied probability of a follow-up BOJ hike is seen at a particularly cool 1%. Is that a touch low?
The tech view:
- Resolving lower from its tight 1+ week congestion band (near the 50-Day MA & 4+ month trendline) to extend the fall from the 10 Jan 158.87 peak
- Risk is now seen to 153.16 (17 Dec 24 low)/200-Day MA ~152.85, below which would expose 151.81 (12 Dec 24 low), poss 151.02 (11 Dec 24 low)
- Bulls need to trade back above 156.75 (23 Jan former range high) to reassert control
| USD/JPY SUPPORT AND RESISTANCE TABLE | ||||||||
| R5 | 161.95 | STRG (2024 peak - 3 Jul) | ||||||
| R4 | 160.26 | FAIR (8 Jul 24 prior low) | ||||||
| R3 | 159.45 | FAIR (12 Jul 24 high) | ||||||
| R2 | 158.87 | STRG (10 Jan high) | ||||||
| R1 | 156.75 | FAIR (23 Jan high) | ||||||
| 154.26 | Price at update | |||||||
| S1 | 153.16 | STRG (17 Dec 24 minor higher low) | ||||||
| S2 | 151.81 | FAIR (12 Dec 24 low) | ||||||
| S3 | 151.02 | FAIR (11 Dec 24 low) | ||||||
| S4 | 148.65 | STRG (3 Dec 24 reaction low) | ||||||
| S5 | 147.35 | FAIR (8 Oct 24 low) | ||||||
An Overall Rating of 63% Bearish in this week's Sentiment Matrix suggests the current decline may have further to go.
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