There are few charts that are as clean cut as that of the USDJPY on a daily time frame. A steady rising trend channel has been in control of price action for four months. This move has been supported by a hunger for risk across asset classes all over the world, which has funneled capital specifically into the carry trade for the FX market. Looking at what the economic calendar has in store, there are few indicators that would have the necessary power to turn the popular strategy as they do not have direct correlation to the eventuality of a BoJ rate hike or Fed cut. While there is always threat of commentary, intervention or another exogenous event that could upset the balance, the trend is still clearly defined. Therefore, we recommend buying on dips in the trend channel (a range with a pitch). The entry for the suggested long order has a natural time limit as rising support will pull support higher. A short would be risky as it goes against the overall trend, so each person should consider it according to their individual risk profile. The recommended range would expire in a week.



Event Risk US and Japan

US – There are a number of top tier indicators on the US economic calendar next week, though their market impact is questionable given the conditions for the period and the lack of a reaction to many of the reports in the past. Activity next week can be seen coming in two waves, split by the Fourth of July holiday on Wednesday. The first two days will find ISM manufacturing for June and pending home sales for the previous month. The housing number is considered lagging, so the factory number will be the headline number. One of the top indicators from the economic bank, the ISM number is preceded by a number of better-than-expected regional factory reports. However, the market may be quiet since some traders will try to extend their weekend from June 30 to July 4. On the other hand, others may try to take the 4th through the 8th off - though they run the risk of missing action on the ISM services report and Friday’s NFPs. The non-manufacturing survey hasn’t moved markets lately, though the employment gauge always holds a high level of risk for the market.

Japanese – Considering the downward spiral the yen is in, it is clear that there are few concerns for traders when considering the Japanese currency. The primary guide for the unit is the carry trade and interest rates. However, the notable indicators on deck have only an indirect relationship to a possible rate hike from the Bank of Japan. What’s more, even if all the indicators printed in one direction, it would not likely sway forecasts for the entire economy and therefore the yen. Breaking the calendar down, there are only two periods of major concern. Monday morning in Japan (Sunday evening for the western hemisphere) brings the greatest level of event risk with the quarterly Tankan and labor cash earnings reports only a few hours apart. Both are expected to improve, which sets the bar somewhat high. After these two reports hit the wires, event risk will clear up. The last hiccup in our trade horizon will be the May machine orders number, which is a very infrequent market mover.



John Kicklighter is a Currency Strategist at FXCM.