Japanese Yen: USD/JPY (JPY=X) – Bank of Japan’s Kuroda Blames Yen’s Fall on Strong Dollar, Upbeat on Economy
The Dollar/Yen is trading lower on Monday as some investors are apparently moving back into the Japanese Yen due to its safe-haven qualities. Last week, the Japanese Yen plunged nearly 2% against the U.S. Dollar, even while traditional safe-haven assets – gold and Treasurys – climbed. The unexpected move prompted investors to suspect a big shift in Japanese asset allocation as well as to ponder the Yen’s role in global finance. Basically, is it a safe-haven asset or not?
Last week’s huge rally in the Dollar/Yen points to a big flow of cash out of Japan.
Analysts who remember a similar sell down in 2014 reckon it was probably from the juggernaut Japanese Government Pension Investment Fund and that it was probably buying foreign bonds ahead of the end of the Japanese financial year in March.
Other analysts are saying the move was fueled by uneasiness because of weakness in Japan’s economy and signs for month that the Yen is decoupling from other safe-haven assets such as gold or bonds.
They say the rationale behind the selling of the Japanese Yen was protection against Japan’s fragile economy and the creeping spread of the coronavirus. Additionally, some market participants are questioning the rationale for its safety status.
Bank of Japan’s Kuroda Blames Yen’s Fall on Strong Dollar, Upbeat on Economy
Bank of Japan Governor Haruhiko Kuroda said on Saturday 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, Reuters reported.
Kuroda also said he had not changed his view that Japan’s economy would continue to recover moderately, suggesting that he saw no immediate need for the BOJ to expand stimulus.
Kuroda also 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.
The direction of the USD/JPY on Monday and over the near-term will be determined by whether investors consider the Japanese Yen a safe-haven investment or just a weak currency.
If traders think the Yen is still a safe-haven asset then the currency could rise sharply if U.S. interest rates and the stock market continue to plunge in reaction to fears the coronavirus outbreak will inflict further damage on the global economy.
Look for the USD/JPY to continue to rise if traders look at the Yen as a weak currency due to expectations of a recession in Japan this quarter.
Overall, the bias in prices is: Upwards.
By the way, prices are vulnerable to a correction towards 109.56.
The projected upper bound is: 111.87.
The projected lower bound is: 109.52.
The projected closing price is: 110.69.
A big black candle occurred. This is bearish, as prices closed significantly lower than they opened. If the candle appears when prices are “high,” it may be the first sign of a top. If it occurs when prices are confronting an overhead resistance area (e.g., a moving average, trendline, or price resistance level), the long black candle adds credibility to the resistance. Similarly, if the candle appears as prices break below a support area, the long black candle confirms the failure of the support area.
During the past 10 bars, there have been 4 white candles and 4 black candles. During the past 50 bars, there have been 23 white candles and 25 black candles for a net of 2 black candles.
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.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 70.4280. This is not an overbought or oversold reading. The last signal was a sell 0 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 56.40. 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 1 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 69. This is not a topping or bottoming area. The last signal was a sell 0 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 12 period(s) ago.
Rex Takasugi – TD Profile
FOREX JPY= closed down -0.900 at 110.670. Volume was 41% above average (neutral) and Bollinger Bands were 94% wider than normal.
Open High Low Close Volume___
111.590 111.680 110.320 110.670 114,762
Short Term: Neutral
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 110.48 109.56 108.40
Volatility: 11 7 7
Volume: 91,073 78,700 87,142
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.
FOREX JPY= is currently 2.1% 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 11 periods.
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