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As if 2020 wasn’t already tumultuous enough, Shinzō Abe, Japan’s longest-serving Prime Minister, unexpectedly resigned on 28 August, citing health issues. Abe will remain in office until a successor is chosen by the country’s ruling Liberal Democratic Party (LDP).
On Monday 14 September, the LDP is expected to hold its leadership election three days before the National Diet will elect a new Prime Minister. Though Abe refused to endorse a preferred successor, Chief Cabinet Secretary Yoshihide Suga is the clear frontrunner and has reportedly solidified his support within the LDP; former Defense Minister Shigeru Ishiba and ex-Foreign Minister Fumio Kishida will also vie for the election. The winner of the election will serve out the rest of Abe’s term, through September 2021.
If Suga secures the election, he has pledged to continue the former PM’s “Abenomics” economic policy, anchored by monetary easing from the Bank of Japan, fiscal stimulus through government spending, and structural reforms. In recent interviews, Suga has also cited deregulation as a key policy goal. While continuity in economic policies should benefit Japanese businesses, there is a risk that Suga could dissolve parliament and call a snap election to solidify his support, which could introduce an extended period of uncertainty and volatility for Japanese assets, including the yen.
Speaking of the yen, Japan’s currency surprisingly saw notable strength against the US dollar on the day Abe announced his resignation, though USD/JPY has since retraced most of that move. Taking a step back, USD/JPY sits near the middle of a “symmetrical triangle” pattern created by a series of lower highs and higher lows in price. For the uninitiated, this pattern is similar to a person compressing a coiled spring: as the range continues to contract, energy builds up within the spring. When one of the pressure points is eventually removed, the spring will explode in that direction.
It’s notoriously difficult to predict the direction of a symmetrical triangle breakout in advance, but markets tend to see large moves following a breakout in either direction. Accordingly, readers may want to wait for a potential breakout around the election and then hop aboard the new trend on any pullbacks. To the topside, USD/JPY could rally up to 108.00, whereas a downside break could target the late July lows near 104.00.
USD/JPY Dollar Exchange Rate
Today’s Forex Rates
USD/JPY Dollar FX Polls
Overall, the bias in prices is: Sideways.
The projected upper bound is: 107.36.
The projected lower bound is: 104.91.
The projected closing price is: 106.13.
A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 6 white candles and 4 black candles for a net of 2 white candles. During the past 50 bars, there have been 23 white candles and 27 black candles for a net of 4 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 55.1401. This is not an overbought or oversold reading. The last signal was a sell 19 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 50.35. 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 30 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 20. This is not a topping or bottoming area. The last signal was a sell 19 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 13 period(s) ago.
Rex Takasugi – TD Profile
FOREX JPY= closed up 0.030 at 106.160. Volume was 75% below average (consolidating) and Bollinger Bands were 50% narrower than normal.
Open High Low Close Volume 106.110 106.200 106.060 106.160 25,062
Technical Outlook Short Term: Neutral Intermediate Term: Bullish Long Term: Bearish
Moving Averages: 10-period 50-period 200-period Close: 106.11 106.28 107.82 Volatility: 4 7 12 Volume: 81,645 92,322 106,401
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 11 periods.
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