Japanese Yen: USD/JPY (JPY=X) BOJ is expected to leave its benchmark interest rate unchanged
The Dollar/Yen rallied last week to its highest level since July 10 as investors pared expectations for aggressive Federal Reserve interest rate cuts. The price action was also driven by a widening of the spread between U.S. Government bond yields and Japanese Government bond yields. This was fueled by stronger than expected U.S. durable goods and GDP data.
The Bank of Japan meets before the Fed, but it’s not expected to change policy. However, traders expect policymakers to seriously discuss whether to ease policy later this year. Some will argue there is no immediate need for action as domestic demand offsets weak exports.
U.S. Economic Data
In the U.S. last week, the major reports were solid, but the minor reports continued to point toward weakness in certain sectors of the economy.
On July 25, the U.S. Commerce Department said that orders for durable goods, or items meant to last at least three years, rose 2%, after a 2.3% decline in May and an even bigger 2.8% drop in April. Investors were looking for an increase of 0.8%.
Core Durable Goods Orders increased 1.2%, up from the previously reported 0.4%. Traders were looking for an increase of 0.2%.
On July 26, the U.S. reported that Advance GDP rose 2.1%, lower than the previously reported 3.1%, but above the 1.8% forecast
On the weak side, red flags were raised by the lower-than-expected Home Price Index, Existing Home Sales and New Home Sales. The Richmond Manufacturing index came in well under the forecast. Flash Manufacturing PMI was 50.0, dangerously close to a contraction.
Japanese Economic Data
There were no major economic reports from Japan. On the minor side, Bank of Japan Core CPI came in as expected at 0.6% and Tokyo Core CPI surprisingly rose 0.9%, higher than the 0.8% forecast. Flash Manufacturing PMI was slightly lower at 49.6.
Overall, the bias in prices is: Sideways.
The projected upper bound is: 109.95.
The projected lower bound is: 107.70.
The projected closing price is: 108.83.
A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 7 white candles and 3 black candles for a net of 4 white candles. During the past 50 bars, there have been 25 white candles and 23 black candles for a net of 2 white candles.
Three white candles occurred in the last three days. Although these candles were not big enough to create three white soldiers, the steady upward pattern is bullish.
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 91.2236. This is an overbought reading. However, a signal is not generated until the Oscillator crosses below 80 The last signal was a buy 8 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 58.52. 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 23 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 134.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a buy 5 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 3 period(s) ago.
Rex Takasugi – TD Profile
FOREX JPY= closed up 0.190 at 108.850. Volume was 38% below average (neutral) and Bollinger Bands were 26% narrower than normal.
Open High Low Close Volume___
108.680 108.890 108.410 108.850 54,254
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bearish
Moving Averages: 10-period 50-period 200-period
Close: 108.15 108.39 110.52
Volatility: 6 7 7
Volume: 78,003 87,321 96,453
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 1.5% below its 200-period moving average and is in an upward trend. Volatility is high 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 15 periods.