Japanese Yen: USD/JPY (JPY=X) Back to Safe-Haven Status?

Japanese Yen: USD/JPY (JPY=X) Back to Safe-Haven Status?

Japanese Yen: USD/JPY (JPY=X) Back to Safe-Haven Status?

The Dollar/Yen is trading lower for a third consecutive session on Tuesday as sellers continue to erase the huge spike to the upside which took place on February 19 and February 20. The price action suggests that those predicting the end of the Japanese Yen’s dominance as a safe-haven asset may have been wrong.

Back to Safe-Haven Status?

Given Monday’s steep sell-off in U.S. equity markets and the sharp break in the Dollar/Yen, it looks as if investors are treating the Japanese Yen as a safe-haven asset once again. The move on Monday clearly reflected a “risk-off” trade as the rising Japanese Yen rallied along with other traditional safe-haven assets like U.S. Treasurys, the Swiss Franc and gold. Yesterday’s rally in the Yen showed no evidence that investors might be discounting the Yen’s traditional safety value owing to Japan’s virus exposure.

BOJ’s Kuroda Blames Yen’s Steep Fall on Strong Dollar

Bank of Japan Governor Haruhiko Kuroda said on Saturday, February 22 the yen’s recent declines were largely driven by a strong dollar, shrugging off some market views that the widening coronavirus epidemic is triggering an outflow of funds from Asia.

Kuroda dismissed views held by some market players that the yen could be losing its status as a safe-haven currency.

“When you look at recent developments, the dollar is strengthening against the yen, the euro and various currencies including those in Asia, Kuroda said.

“It’s true there is uncertainty over the coronavirus outbreak’s impact on the Chinese, Asian and global economies. But I don’t think there has been a fundamental change in the exchange-rate market.”

Daily Forecast

The next few days could be critical as to determining whether the Japanese Yen is still a safe-haven asset. Monday’s price action certainly supports the case for those who believe it is still a safe-haven. U.S. stocks plunged and the Japanese Yen rose sharply.

Furthermore, with the USD/JPY losing more than 50% of its surge last Wednesday and Thursday, it is starting to look like the spike to the upside was fueled by massive buying from the juggernaut Japanese Government Pension Investment Fund that was probably buying foreign bonds ahead of the end of the Japanese financial year in March.

Technical Indicators

Overall, the bias in prices is: Sideways.

By the way, prices are vulnerable to a correction towards 109.56.

The projected upper bound is: 111.35.

The projected lower bound is: 108.96.

The projected closing price is: 110.15.

Candlesticks

A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 4 white candles and 5 black candles for a net of 1 black candles. During the past 50 bars, there have been 23 white candles and 25 black candles for a net of 2 black candles.

Three black candles occurred in the last three days. Although these candles were not big enough to create three black crows, the steady downward pattern is bearish.

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 44.0159. This is not an overbought or oversold reading. The last signal was a sell 1 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 51.02. 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 sell 2 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 5. This is not a topping or bottoming area. The last signal was a sell 1 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 13 period(s) ago.

Rex Takasugi – TD Profile

FOREX JPY= closed down -0.570 at 110.140. Volume was 43% above average (neutral) and Bollinger Bands were 90% wider than normal.

Open     High      Low     Close     Volume___
110.710 111.030 109.870 110.140 116,763
Technical Outlook 
Short Term: Neutral
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period     50-period     200-period
Close: 110.53 109.57 108.40
Volatility: 11 7 7
Volume: 94,295 79,738 87,264

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 1.6% above its 200-period moving average and is in an upward trend. Volatility is extremely high when compared to the average volatility over the last 10 periods. There is a good possibility that volatility will decrease and prices will stabilize in the near term. 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 12 periods. our momentum oscillator has set a new 14-period low while the security price has not. This is a bearish divergence.

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