Japanese Yen: USD/JPY (JPY=X) Light Short-Covering as Safe-Haven Demand Eases

Japanese Yen: USD/JPY (JPY=X) Light Short-Covering as Safe-Haven Demand Eases

Japanese Yen: USD/JPY (JPY=X) Light Short-Covering as Safe-Haven Demand Eases

The Dollar/Yen is trading slightly better on Wednesday and inside yesterday’s trading range. This typically indicates investor indecision and impending volatility. There was no follow-through to the downside, following yesterday’s steep break.

The price action is being fueled by an easing of tensions over the spread of the corona virus. The news is enough to underpin the Forex pair, but not enough signal a resumption of the uptrend.

Tensions over Corona Virus Ease but Remain at Forefront

Public health officials have confirmed the first U.S. case of a mysterious coronavirus that has sickened hundreds of people in China, the Centers for Disease Control (CDC) and Prevention said Tuesday.

On Wednesday, Chinese officials confirmed that nine people died as of January 21.

Meanwhile, CDC officials said they continue to believe the risk of it spreading to the American public is “low.”

The World Health Organization is expected to convene a panel of experts in Geneva, Switzerland, on Wednesday to consider whether the illness should be a global health emergency.

Demand for safe-haven assets are easing because China’s response to the virus outbreak tempered some fears of a global pandemic. China’s response and candor – in contrast to the initial cover-up of the SARS outbreak in 2002-03 – have helped reassure investors concerned about the possible global fallout.

China’s National Health Commission said on Wednesday there were 440 cases of the new virus, with nine deaths so far. Measures are now in place to minimize public gatherings in the most-affected regions.

Receding Risks May Give BOJ Room to Tweak Forward Guidance

After Tuesday’s Bank of Japan decisions to leave policy and interest rates unchanged, policymakers could consider watering down later this year its commitment to keep or cut its rock-bottom interest rates, if pessimism over the global outlook continues to recede, sources say.

Any such tweak would be a sign Japan’s central bank is stepping back from the likelihood of expanding stimulus anytime soon, said three sources familiar with the BOJ’s thinking.

“If global economic growth shows clear signs of recovery around mid-year, there may be room to debate modifying the forward guidance,” one of the sources said on condition of anonymity because of the sensitivity of the matter.

BOJ Governor Haruhiko Kuroda on Tuesday did not rule out the chances of debating a tweak, but set the bar fairly high.

“If risks subside significantly and growth jumps up more than we project now, a review could be debated,” Kuroda told a briefing. “For now, it’s appropriate to maintain our policy stance based on our current growth and price projections.”

Daily Forecast

The early price action suggests an easing of concerns over the spread of coronavirus could encourage investors to liquidate their safe-haven Japanese Yen positions placed earlier in the week. This would drive the USD/JPY higher.

If worries continue to linger then the Forex pair could become rangebound over the short-term.

Technical Indicators

Overall, the bias in prices is: Sideways.

By the way, prices are vulnerable to a correction towards 109.13.

The projected upper bound is: 110.70.

The projected lower bound is: 109.06.

The projected closing price is: 109.88.

Candlesticks

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 28 white candles and 22 black candles for a net of 6 white candles.

A long upper shadow occurred. This is typically a bearish signal (particularly when it occurs near a high price level, at resistance level, or when the security is overbought).

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 40.1277. This is not an overbought or oversold reading. The last signal was a sell 1 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 58.51. 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 116 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 51. This is not a topping or bottoming area. The last signal was a sell 3 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 8 period(s) ago.

Rex Takasugi – TD Profile

FOREX JPY= closed unchanged at 109.860. Volume was 15% below average (neutral) and Bollinger Bands were 42% wider than normal.

Open     High      Low     Close     Volume___
109.850 110.090 109.810 109.860 70,150
Technical Outlook 
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period     50-period     200-period
Close: 109.89 109.14 108.52
Volatility: 4 5 7
Volume: 74,801 77,079 86,745

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 1.2% above its 200-period moving average and is in an upward trend. Volatility is relatively normal 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 7 periods.

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