Technical Analysis for December: USDJPY, USDCHF

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Technical analysis for December

USDJPY Technical Analysis for December

The Yen saw a 5th month of consecutive decline, with the month of November seeing an added boost to USDJPY on continuous divergence policies from the respective central banks. With November’s data showing Japan in a technical recession, Shinzo Abe had put off the sales tax hike as well as calling for snap elections to be held on December 14th. The Yen is most likely to rally should Abe win the elections with a majority. It would be seen as a mandate for Abe to continue his Abenomics in an effort to push inflation to the BoJ’s target levels.

The US Dollar on the hand, which has enjoyed weeks of rally, has started showing signs of weakness in the Dollar Index. A correction to the rally cannot be ruled out considering that the Greenback had so far made a very negligible 1.3% correction approximately since its rally in May/June.

With the most recent, 3rd quarter GDP being revised higher, the US Dollar is well positioned against a weaker Yen. However, recent data from the US, especially the data dump ahead of Thanksgiving holiday saw some mixed fundamentals with a possibility of a lower 4th quarter GDP as well (at the time of writing). Unless the holiday sales are able to boost both the retail as well as the suppliers, the GDP is most likely to come out weak.

Since the previous month’s analysis, USDJPY managed to close November on a bullish note at 118.716. Major technical resistance comes in at 120 – 121 price zones, which is a long term trend line as well. After the bullish flag break out there hasn’t been much of a correction in USDJPY. However, the short term rising trend line could possibly act as support for any declines in USDJPY.

Technical Analysis for December

 

Given the above view, the best course of action is to continue to pick up the dips in the rally as long as price doesn’t yet reach 120-121 price zones. Traders should also bear in mind that the major support at 109 levels needs to be kept in mind.

The FOMC will be meeting in December for its last policy review meeting for the year. With QE now done with, focus will be on the FOMC’s language as markets continue to look under the microscope for any possible clues towards interest rate hikes, which is currently expected to be during Q2 of 2015.

USDJPY Monthly Pivots

R3 R2 R1 Pivot S1 S2 S3
127.348 123.165 120.94 116.757 114.532 110.349 108.124

 

USDCHF Technical Analysis

With the Swiss voters rejecting the Gold referendum over the weekend, the SNB can heave a sigh of relief as it can move on with its policies of weakening the Swiss Franc. On the SNB’s mandate, maintaining the EURCHF floor at 1.20 as well as the possibility to move into negative deposit rate territory seems more possible.

The SNB will be holding its monetary policy review mid next week (December 11th) which is likely to provide more clues. However, the SNB’s negative deposit rate issue comes to the forefront only in the event that the ECB takes concrete measures in terms of its proposed QE. The ECB is expected to act during the first quarter of 2015. However, we expect this to be unlikely to happen as long as Jens Weidmann is on the policy making seat. Weidmann is expected to give up his voting rights in May and October 2015 and this is where the ECB could act. However, questions remain on the legality of the QE purchases and could also possibly upset the Germans should the vote be passed at a time when the major hawk in ECB cannot vote.

The month of November has seen the USDCHF end up with a doji type of a candlestick pattern indicating indecision. This also means that price could head in either direction. The line chart for USDCHF offers some insights as we can see a major support/resistance level sitting in the region of 0.99289 and 0.97898. A break above this level is therefore essential to see any further upside gains in USDCHF. Alternatively, if the resistance holds, we could see a possible decline towards 0.9097 in the long term.

Technical Analysis for December

 

USDCHF Monthly Pivots

R3 R2 R1 Pivot S1 S2 S3
0.9969 0.9855 0.9758 0.9644 0.9547 0.9434 0.9337

 

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