Japanese Yen: USD/JPY (JPY=X) Fed Brings in More Dollars
The Dollar/Yen drifted on Friday mostly due to thin holiday trading with most of the major financial centers closed for Good Friday. The general theme for the week was bearish with another stimulus measure by the U.S. Federal Reserve weighing the most on prices. Investors primarily ignored the surge in demand for risky assets which tends to support the Forex pair, instead choosing to react to the oversupply of U.S. Dollars in the market at this time.
Fed Brings in More Dollars
On Thursday, April 9, the U.S. Federal Reserve announced a massive new lending program for small companies. The details of the program are not as important as to what it means to the U.S. Dollar and its relationship with other currencies.
The Fed has hit the financial markets and the U.S. economy with a number of programs since the beginning of March. The end result is a large increase in the supply of dollars.
This latest program is a $2.3 trillion offer of loans to local governments and small and mid-sized businesses and represent the latest step to backstop the U.S. economy as the country battles the coronavirus crisis.
In March, the Fed slashed interest rates to zero, restarted quantitative easing, and increased dollar liquidity to combat a shortage in money markets, leaving the dollar in the grip of bears in the spot market.
Japan Unveils Stimulus Package
Early last week, Japan unveiled a record 108.2 trillion yen ($992 billion) stimulus package to shield the economy from the coronavirus’ widening a Prime Minister Shinzo Abe declared a state of emergency.
The package’s size, with a headline figure equivalent to 20% of the nation’s annual economic output, highlights the magnitude of the damage that policy makers are bracing for. Japan’s economy faces its biggest crisis since the end of the Second World War, Abe told reporters Tuesday.
Do the Math
The size of last week’s Fed package was two times the size of Japan’s stimulus move. Put that on top of the other massive stimulus moves, both monetarily and fiscally, and you have a huge amount of dollars floating around the world.
If coronavirus cases continue to dip in key global hotspots then demand for higher risk assets should continue to rise and demand for the greenback should continue to weaken. This could be the normal response for several months so we’re not looking for investors to start selling Yen to buy stocks. Money is cheap all around the world and especially at home in the U.S. This reduces the need for the carry trade in my opinion.
I’ll probably change my bearish opinion about the USD/JPY if buyers overtake 109.884 with conviction. In the meantime, I’m looking for a minimum break to 106.706 to 106.450 over the near-term. Losses should start to steepen under this area.
Overall, the bias in prices is: Sideways.
The projected upper bound is: 111.34.
The projected lower bound is: 104.41.
The projected closing price is: 107.87.
A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 4 white candles and 6 black candles for a net of 2 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 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 23.0767. This is not an overbought or oversold reading. The last signal was a sell 2 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 46.76. 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 24 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 12 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 0 period(s) ago.
Rex Takasugi – TD Profile
FOREX JPY= closed down -0.570 at 107.890. Volume was 65% below average (consolidating) and Bollinger Bands were 22% wider than normal.
Open High Low Close Volume___
108.520 108.520 107.870 107.890 37,826
Short Term: Neutral
Intermediate Term: Bullish
Long Term: Bearish
Moving Averages: 10-period 50-period 200-period
Close: 108.25 108.72 108.33
Volatility: 9 21 12
Volume: 139,904 132,383 97,361
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 0.4% below its 200-period moving average and is in an upward 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 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 4 periods.