Japanese Yen: USD/JPY (JPY=X) Buy at 105.20
USD/JPY has opened the week’s trade on a bearish note as risk-off amid fresh US-China trade woes weighs.
The major was trading 0.14% lower on the day at 106.73 at around 05:15 GMT after closing 0.23% lower on Friday’s trade.
US diplomats allege China for the mishandling of the Coronavirus pandemic. Chinese dailies tried to turn down the allegations on Friday.
Any deterioration of the US-China trade relations could keep the risks heavy and add to downside in the pair.
Technical studies support downside.Major and minor trend as indicated by GMMA are bearish.
RSI is well below 50 and biased lower. ‘Death cross’ on the daily charts could plummet prices.
21-EMA caps upside and price action is extending downside below 200-DMA. Break below cloud will see further downside.
Major Support Levels: 106.44 (50% Fib), 106, 105.20 (61.8% Fib)
Shayne Heffernan Trade Idea
Last week’s price action was all about demand for risk and less about interest rates. This trend is likely to continue this week. The U.S. Dollar started the week on the back foot, reflecting more risk on trading conditions.
This week, traders will put more weight on the reopening of the economy along with brewing tensions between the Unites States and China.
With states across the U.S. letting nonessential businesses reopen and easing stay-at-home orders in an effort to restart the economy, investors are going to refocus on the number of coronavirus cases to see if the U.S. is doing the right thing, or if they have to go back to even stronger restrictions.
“The next 2-4 weeks are critical for both the economic crisis and the health crisis. The biggest risk to the stock market is a premature reopening of the U.S. economy. If rising COVID-19 curves reemerge and economies are shut down again the damage to the stock market’s psyche will be dramatic”
If fear returns to the markets then look for investors to flock to the U.S. Dollar for protection. This should drive up the USD/JPY.
Why This Matters
Investors were encouraged early in the week to move money into riskier assets and out of the U.S. Dollar after the Australian states of Queensland and Western Australia said they would slightly ease social distancing rules this week as the number of people infected decreased on the continent.
Encouraged by a fall in infection rates, Germany also has allowed on Sunday small retail stores to reopen, provided they adhere to strict distancing and hygiene rules. Now large corporations are following suit. Additionally, Italy will also ease lockdown measures from May 4.
Bank of Japan
The BOJ expanded its stimulus to help companies hit by the coronavirus crisis, pledging to buy unlimited amounts of bonds to keep borrowing costs low as the government tries to spend its way out of the deepening economic pain.
The move puts the BOJ in line with other major central banks that have unleashed unprecedented amounts of monetary support as the health crisis stokes fears of a deep global recession. The central bank also sharply cut its economic forecast and projected inflation would fall well short of its 2% target for three more years, suggesting its near-term focus will be to battle the crisis.
US Federal Reserve
“The Federal Reserve is committed to using its full range of tools to support the U.S. economy in this challenging time, thereby promoting its maximum employment and price stability goals,” the central bank said in a statement at the end of a two-day policy meeting on Wednesday.
The Fed’s statement came after data on Wednesday showed that the U.S. economy contracted in the first quarter. The Commerce Department said gross domestic product fell at a 4.8% annualized rate in the January-to-March period after expanding at a 2.1% rate in the final three months of 2019.
Overall, the bias in prices is: Downwards.
By the way, prices are vulnerable to a correction towards 108.19.
The projected upper bound is: 110.07.
The projected lower bound is: 103.34.
The projected closing price is: 106.70.
A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 2 white candles and 8 black candles for a net of 6 black candles. During the past 50 bars, there have been 21 white candles and 29 black candles for a net of 8 black candles.
A spinning top occurred (a spinning top is a candle with a small real body). Spinning tops identify a session in which there is little price action (as defined by the difference between the open and the close). During a rally or near new highs, a spinning top can be a sign that prices are losing momentum and the bulls may be in trouble.
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 48.4376. This is not an overbought or oversold reading. The last signal was a buy 12 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 41.59. 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 39 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 -106.This is an oversold reading. However, a signal isn’t generated until the indicator crosses above -100. The last signal was a buy 2 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 sell 15 period(s) ago.
Rex Takasugi – TD Profile
FOREX JPY= closed down -0.150 at 106.780. Volume was 52% below average (consolidating) and Bollinger Bands were 48% narrower than normal.
Open High Low Close Volume 106.810 106.950 106.650 106.780 55,811
Technical Outlook Short Term: Neutral Intermediate Term: Bearish Long Term: Bearish
Moving Averages: 10-period 50-period 200-period Close: 107.22 107.84 108.27 Volatility: 4 20 12 Volume: 119,148 144,185 101,333
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 1.4% below its 200-period moving average and is in an downward trend. Volatility is extremely low when compared to the average volatility over the last 10 periods.
There is a good possibility that there will be an increase in volatility along with sharp price fluctuations in the near future. Our volume indicators reflect moderate flows of volume out of JPY= (mildly bearish). Our trend forecasting oscillators are currently bearish on JPY= and have had this outlook for the last 4 periods.
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