Focus this week for Japanese Yen: USD/JPY (JPY=X) traders should be on U.S. Treasury yields

Focus this week for Japanese Yen: USD/JPY (JPY=X) traders should be on U.S. Treasury yields

Focus this week for Japanese Yen: USD/JPY (JPY=X) traders should be on U.S. Treasury yields

Last week’s mostly sideways trade in the USD/JPY sent a message to me that investors weren’t worried about risk or the direction of interest rates. The muted reaction to the mixed-to-potentially bearish U.S. economic data further confirmed my assessment. However, the skeptic in me says those are the exact things we should be worried about this week.

Stocks have been steadily climbing for nine weeks. Furthermore, downside risks have been dampened. According to FactSet, the S&P 500 Index hasn’t experienced a decline of 1% or more for the last 20 trading days. Additionally, the headlines about a U.S.-China trade deal may have convinced investors that they have no worries.

Given last week’s tight trading range in the USD/JPY, I think investors should approach this week with an air of caution because I don’t think this pattern will continue. A second week of extreme tightness would support my argument even more that the Dollar/Yen is setting up for the return of heightened volatility.

The early focus this week for Dollar/Yen traders should be on U.S. Treasury yields. The chart pattern in the March 10-year U.S. Treasury note futures contract suggests investors need to prepare for a major move in Treasury yields. The catalyst behind this move could be the three days of testimony by U.S. Federal Reserve Chairman Jerome Powell on Tuesday, Wednesday and Thursday.

If Powell is dovish in his remarks then then Treasury yields could plunge and this would be bearish for the USD/JPY. A steep drop in U.S. Treasury yields this week will tighten the interest rate differential, making the U.S. Dollar a less-desirable assets.

If Powell is hawkish then Treasury yields could soar, triggering a spike to the upside in the USD/JPY.

The direction of the USD/JPY is uncertain because it depends on Powell. However, I am confident that we will see better-than-average volatility this week.

Overall, the bias in prices is: Sideways.

The projected upper bound is: 112.00.

The projected lower bound is: 109.23.

The projected closing price is: 110.62.

Candlesticks

During the past 10 bars, there have been 6 white candles and 2 black candles for a net of 4 white candles. During the past 50 bars, there have been 24 white candles and 23 black candles for a net of 1 white candles.

A long lower shadow occurred. This is typically a bullish signal (particularly when it occurs near a low price level, at a support level, or when the security is oversold).

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 55.3673. This is not an overbought or oversold reading. The last signal was a sell 7 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 57.74. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 36 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 48. This is not a topping or bottoming area. The last signal was a sell 6 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 29 period(s) ago.

Rex Takasugi – TD Profile

FOREX JPY= closed down -0.020 at 110.660. Volume was 99% below average (consolidating) and Bollinger Bands were 17% narrower than normal.

Open High Low Close Volume___
110.660 110.680 110.610 110.660 1,064

Technical Outlook
Short Term: Neutral
Intermediate Term: Bullish
Long Term: Bearish

Moving Averages: 10-period 50-period 200-period
Close: 110.65 109.85 111.30
Volatility: 4 8 7
Volume: 85,464 94,999 105,449

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

FOREX JPY= is currently 0.6% below its 200-period moving average and is in an upward trend. Volatility is relatively normal as compared to the average volatility over the last 10 periods. Our volume indicators reflect volume flowing into and out of JPY= at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on JPY= and have had this outlook for the last 20 periods.

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