Japanese Yen: USD/JPY (JPY=X) Investors Fear Spreading Coronavirus Will Drag Down Asian Economies

Japanese Yen: USD/JPY (JPY=X) Investors Fear Spreading Coronavirus Will Drag Down Asian Economies

Japanese Yen: USD/JPY (JPY=X) Investors Fear Spreading Coronavirus Will Drag Down Asian Economies

The major surprise in the Forex markets last week was the plunge in the Japanese Yen. The usual safe-haven currency posted its worst week in two-and-a-half years as worries about the coronavirus’ spread in South Korea, Japan and Beijing drove funds from Asia to the U.S. Dollar.

Following weak domestic data and growing fears about the coronavirus’ economic fallout, the Japanese Yen plummeted to its lowest level since last April as investors questioned its worth as a safe-have asset.

Investors Fear Spreading Coronavirus Will Drag Down Asian Economies

As of Friday, the coronavirus has killed more than 2,200 people in mainland China and efforts to contain it have largely paralyzed the world’s second biggest economy. Also on Friday, South Korean authorities confirmed 52 new coronavirus infections, Yonhap reported, bringing its total to 156 and raising further alarm about the epidemic.

Two infected passengers from a cruise ship quarantined near Tokyo have died, and two passengers evacuated from the liner to Australia have now tested positive.

The jump in cases in South Korea and in Japan seems to have put a little fear in investors regarding Japan and the Yen’s appeal as a safe-haven asset.

Weekly Forecast

Why did the Japanese Yen weaken last week? Japan’s economy is flirting with recession and the coronavirus could put it over the edge. Last week’s data serves as proof that the virus is likely to stamp out hopes for an economic recovery in the first quarter and investors lost confidence in the currency as a safe-haven asset.

The Dollar/Yen blew past the 112 level last Thursday to a 10-month high against a broadly stronger U.S. Dollar. The catalysts behind the surge were increasing concerns over Japan’s economic health. Although demand for the dollar softened on Friday due to weaker-than-expected U.S. manufacturing and services PMI data, conditions are ripe for further upside action this week especially if the coronavirus continues to spread in Asia.

In my opinion, it’s going to take a while for investors to regain confidence in the Japanese Yen after last week’s debacle.

Technical Indicators

Overall, the bias in prices is: Upwards.

By the way, prices are vulnerable to a correction towards 109.61.

The projected upper bound is: 112.65.

The projected lower bound is: 110.43.

The projected closing price is: 111.54.

Candlesticks

A black body occurred (because prices closed lower than they opened).
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.

A hammer occurred (a hammer has a long lower shadow and closes near the high). Hammers must appear after a significant decline or when prices are oversold to be valid. When this occurs, it usually indicates the formation of a support level and is thus considered a bullish pattern.

A hanging man occurred (a hanging man has a very long lower shadow and a small real body). This pattern can be bullish or bearish, depending on the trend. If it occurs during an uptrend (which appears to be the case with FOREX JPY=) it is called a hanging man line and signifies a reversal top. If it occurs during a downtrend it is called a bullish hammer.

A long lower shadow occurred. This is typically a bullish signal (particularly when it occurs near a low price level, at a support level, or when the security is oversold).

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 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 81.1933. This is an overbought reading. However, a signal is not generated until the Oscillator crosses below 80 The last signal was a sell 9 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 66.56. 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 112.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a sell 7 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 12 period(s) ago.

Rex Takasugi – TD Profile

FOREX JPY= closed down -0.070 at 111.500. Volume was 93% below average (consolidating) and Bollinger Bands were 105% wider than normal.

Open     High      Low     Close     Volume___
111.590 111.590 111.200 111.500 5,472
Technical Outlook 
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period     50-period     200-period
Close: 110.57 109.58 108.41
Volatility: 9 6 7
Volume: 80,144 76,514 86,595

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 2.9% 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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