Dollar/yen is trading at a near 6 year high above 106.70, taking only small breaks on its relentless road higher. What are the next levels to watch out for?
To answer the question, we need to look back at levels last seen in 2007 and 2008, when the yen served as the funding currency for carry trades and the pair was trading at very high levels.
So, here is the big picture: a weekly chart of the pair, from mid 2007 until now. we can see how the pair is returning to the pre-GFC levels:
Quite a long way for the dollar/yen. For the recent surge, here are 3 reasons.
And now, to get a better picture of the levels we are looking at, here is a zoomed in look at the years leading to the crisis. A description of the lines appears below.
So, the next line is not that far, in terms of current volatility: 107.15 provided support to the pair in late 2007, before a surge began.
Higher, 108.60 is strong resistance, capping the pair during the summer of 2008 and earlier in February 2008. This is certainly a line to watch.
The next line is the obvious round level of 110, that is probably eyed by many politicians, policymakers and also by technical analysts, despite the lack of evidence that it served as a line of importance.
Above, we find 110.70, which was the highest level just before the crisis erupted and reversed the carry trade. It is closely followed by 111.60, which was a swing low in 2007.
Even higher, the big levels to watch are 114.65, which was the peak in late 2007, 118, which capped the pair stubbornly in the autumn of 2007 and far above, 124.
In case of reversal
Looking down, the levels are tighter and refer to more recent trading levels. They can be better seen in the first chart. 105.44 was the peak at the turn of 2013 and 2014and was breached only recently.
104.10 was a high in March, when the pair was busy in range trading. 103.75 follows closely after being a swing high back in 2013.
102 is the “magnet” line to which the pair was attracted during long trading days. The 2014 low of 100.75 is the last line before the very round number of 100.
For more, see the dollar yen prediction
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