Japanese Yen: USD/JPY (JPY=X) near-term bias remains neutral
The Dollar/Yen finished marginally higher last week after posting an uneventful two-sided trade.
The Forex pair fell to a two-week low as risk sentiment returned to the market following better-than-expected economic data from China (Trade Balance), which painted a less gloomy picture than feared following the coronavirus outbreak there.
Shayne Heffernan Trade Idea
“We are coming into the eye of the storm.”
“And as the market starts to focus less on virus headlines, or at least will be less sensitive to better news, we will focus more on the lasting effects on the economy and solvency.” Shayne Heffernan PhD in Economics
Why This Matters
Markets, in general, are quite volatile at the moment, with the currency market being no exception.
In this regard, it is very hard to predict in the short term where the JPY/USD can be expected to go next. However, depending on how much longer lockdown restrictions remain in place and the long-term economic ramifications of the same, the JPY/USD could end up reclaiming its role as a safe-haven currency after several years of greenback strength.
Interest rates in the United States have dropped to near zero in an attempt to re-stimulate the economy after this crisis. While the Bank of Japan is maintaining negative interest rates at -0.1 percent, higher rates in the United States were previously enticing investors to the dollar. However, this is no longer likely to be the case given that monetary policy in the U.S. has diverged quite drastically from a series of controlled rate rises – owing to the necessity of stimulating the economy with rate cuts.
Regarding monetary policy in Japan, the U.S. rate cut has afforded discretion to the Bank of Japan in significantly increasing its purchases of riskier assets such as ETFs and real estate trust funds – up to ¥12 trillion and ¥180 billion respectively.
However, the Nikkei 225 declined on this move, as it indicates that the central bank has limited leeway to ease further. In turn, this could mean that we see a rise in the yen against the greenback. While the USD had been propped up by rising interest rates, the Bank of Japan has limited room to keep the yen weak after adopting more stringent quantitative easing measures than the U.S. over the years.
Overall, the bias in prices is: Sideways.
By the way, prices are vulnerable to a correction towards 108.50.
The projected upper bound is: 111.11.
The projected lower bound is: 104.19.
The projected closing price is: 107.65.
A white body occurred (because prices closed higher 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.
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 54.0360. This is not an overbought or oversold reading. The last signal was a buy 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 46.80. 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 29 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 -44. This is not a topping or bottoming area. The last signal was a buy 3 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 5 period(s) ago.
Rex Takasugi – TD Profile
FOREX JPY= closed up 0.180 at 107.690. Volume was 39% below average (neutral) and Bollinger Bands were 1% narrower than normal.
Open High Low Close Volume 107.550 107.940 107.470 107.690 66,768
Technical Outlook Short Term: Neutral Intermediate Term: Bullish Long Term: Bearish
Moving Averages: 10-period 50-period 200-period Close: 108.00 108.50 108.31 Volatility: 7 21 12 Volume: 129,542 137,494 99,032
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 0.6% 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 9 periods.
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