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USDJPY - Settles in Range Under 107 as PM Abe Departs



USDJPY - Settles in Range Under 107 as PM Abe Departs
In the last week or so the USDJPY has rallied up again from support around the key 105 level back to around 106, after received similar support from the 105 level only a few weeks ago. In the last few weeks the USDJPY has also made multiple attempts to break through the other key level at 107 however it has met stiff resistance on every occasion. After trading in a very narrow range right around the key 107 level in late July, the USDJPY then went on a rollercoaster ride as it fell sharply to a five month low near 104 before rallying strongly back to resistance at 107. Since that time it has consolidated in a range between the two key levels of 105 and 107.

In late June the USDJPY moved through the key 107 level to a three week high before slowly easing back towards 107 where it is found some support. This level has now reversed roles providing stiff resistance to the USDJPY. Interestingly, the USDJPY has spent considerable time trading around the 107 level and has often seemed content to settle around it.

In early June the USDJPY moved sharply dropping from above the key 109 level and two month high down through the popular range and back below the key 107 level to a one month low, after having previously surged higher through 109. For several months, the 107 level supported the currency pair well pushing it back towards 108 and 109 repeatedly, before the recent drop lower. For the best part of three months, the USDJPY traded back and forth between 107 and 109 after having dropped sharply from a one month high around 111.50, and these levels are likely to continue to play a role should the USDJPY rally again.

Through the middle of March, the USDJPY surged higher to regain lots of lost ground moving up from lows near 101 back up to the 111.50 range. The most significant move of late is when the USDJPY fell from a 12 month high above 112 down to a three year low near 101 in short time. Up until the high above 112, the USDJPY was content to trade in a wide range right around the 109 level, not showing any signs of moving too far away from it. Even around the middle of last year, the 109 level was providing significant resistance and pushing prices lower on a regular basis. Earlier this week, whenever the USDJPY traded above 109, it wasn’t long until it was pushed lower again.

Outgoing Japanese Prime Minister Shinzo Abe announced his resignation last week due to poor health, and has left his successor to tackle the unfinished business of reviving Japan’s economy.  His close aide, Chief Cabinet Secretary Yoshihide Suga, has surfaced as the leading candidate to assume the mantle and has said he would “maintain and push forward” with ‘Abenomics’, which involve large-scale monetary policy easing, fiscal spending and structural reforms. The ‘Abenomics’ stimulus policies pursued by Prime Minister Shinzo Abe aimed at pulling Japan out of deflation.  Mr Suga added that he would have the Bank of Japan take further monetary easing steps to protect jobs, if he were to become prime minister.  "We'll look at developments and if it's necessary to protect jobs, I'd like to promote further monetary policy (steps) because the economy is at a critical juncture," Suga told a news conference after announcing his decision to run for leader of the ruling Liberal Democratic Party (LDP). "Even when the economy is in such a severe state, we were able to create more jobs, the yen is stable around 105 (to the dollar) and the (Nikkei) stock average is around 20,000," he added.

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The information provided herein is for general informational and educational purposes only. It is not intended and should not be construed to constitute advice. If such information is acted upon by you then this should be solely at your discretion and Valutrades will not be held accountable in any way.

This post was written by Graeme Watkins

CEO Valutrades Limited, Graeme Watkins is an FX and CFD market veteran with more than 10 years experience. Key roles include management, senior systems and controls, sales, project management and operations. Graeme has help significant roles for both brokerages and technology platforms.