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USD/JPY, USD/CHF providing traders certainty in an uncertain world

Article By: ,  Market Analyst
October 2, 2024 1:22 AM
  • USD/JPY, USD/CHF remain respectful of chart levels despite increased tensions in the Middle East
  • Neither fell dramatically on Tuesday, providing a clue on directional risks
  • ADP Employment a known risk events for traders to navigate on Wednesday

Overview

Traditional safe havens such as USD/JPY and USD/CHF are providing traders with some semblance of certainty in an increasingly uncertain world, taking their cues on Tuesday just as much from chart levels than geopolitical developments.

No evidence of panic

When I woke to news of Iran’s missile attack on Israel I expected to see the Japanese yen and Swiss franc up multiple percentage points against other major FX names. But rather than the reaction you’d normally see given the seriousness of the situation, neither gave the impression of any meaningful market panic. Instead, prices were respectful of prior levels, making me think instead of being headline-driven markets today, setups using known levels could be just as effective for traders .

USD/JPY tests out old levels

After Japan’s LDP leadership contest made a meal of respected downtrends and uptrends last Friday, it’s notable that traders have not yet entirely dismissed their relevance with Monday’s rebound stalling at former uptrend support before it was tested again on Tuesday. The price also bounced off former downtrend resistance during yesterday’s session, suggesting that too remains relevant.

I have no certainty which direction the price will move today, but what I do know is RSI (14) and MACD continue to provide positive signals on momentum. It’s also telling that despite the headlines, USD/JPY failed to register a meaningful pullback on Tuesday, suggesting the overall bias may be to continue buying dips until provided a compelling reason not to.

Levels to watch on the topside include former uptrend support located around 144.75, the 50-day moving average, Friday’s high around 146.50 and horizontal resistance at 147.06.

USD/CHF coiling near multi-year lows

The story is much the same for USD/CHF which managed to close higher on Tuesday, likely reflecting broader weakness across European currencies against the US dollar.

Zooming out a touch, you can see the price continues to coil in a triangle pattern, suggesting that when we see it eventually broken, the move could be meaningful in scale.

Like USD/JPY, recent price action and signals from momentum indicators continue to point to buying dips remaining the preferred strategy near-term.

On the downside, triangle support around .8410 is the first level of note, especially with .8400 soaking up offers on moves towards and through it since the latter parts of August. If that zone were give way, the next level of interest would be the September 6 low of .8375.

On the topside, triangle resistance is found today around .8475. Above, .8515, .8550 and the 50-day moving average are levels of note.

US jobs data in focus 

Outside headlines associated with the Middle East conflict, the main known event risk today is the US ADP National Employment report which has provided a decent signal on private sector hiring in the official BLS US nonfarm payrolls survey released Friday.

An increase of 120,000 is expected, up from 99,000 in August. Given the influence the US interest rate outlook continues to have on USD/JPY and to a lesser degree USD/CHF, the magnitude of the beat or miss relative to forecasts could drive movements in US bond yields and both currency pairs later in the session.

-- Written by David Scutt

Follow David on Twitter @scutty

 

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