Japanese Yen: USD/JPY (JPY=X) to benefit on further Middle East tensions
The Japanese Yen is expected to outperform other currencies on a material escalation in tensions between the U.S. and Iran, says Chris Turner, Global Head of Strategy and Head of EMEA and LATAM Research at ING Bank.
“Were events in the Middle East to escalate severely, overweight positioning in risk assets could easily trigger a 7-10% correction in global equity markets,” says Turner.
A shift out of global stocks is in turn tipped to benefit the Yen:
“The Japanese Yen should once again outperform – especially against those risk-sensitive currencies directly exposed to oil exports via the Straits of Hormuz, i.e. the Korean won and the Indian rupee,” says Turner.
Global stock markets and commodities were sent into a decline on Friday, January 03 after the U.S. killed senior Iranian military commander Qasem Soleimani and sparked a spike in tensions in the Middle East.
“The U.S. air attacks on Iran have triggered a flight to “safe havens” in the currency market. USD and JPY are benefiting, whereas the EUR, but especially EM currencies are the losers. There is no need to look for fundamental reasons. The reflex of the currency market is to do what has worked in similar situations in the past,” says Ulrich Leuchtmann, Head of FX & Commodity Research at Commerzbank.
Global financial markets are likely to remain nervous as Iran has vowed to avenge the death, while U.S. President Donald Trump has in turn stated the U.S. is ready to hit 52 Iranian targets in response to any subsequent Iranian retaliation.
The conditions for an escalation in geopolitical tensions are therefore in place and the Japanese Yen stands to benefit, it would appear.
“Unfortunately, the new decade has kick started with an escalation in US-Iran tensions, which has triggered risk-off market conditions. Geopolitics will therefore remain in the spotlight for the foreseeable future,” says George Vessey, Currency Strategist at Western Union.
The Pound-to-Yen exchange rate has pulled lower to 141.63 at the time of writing as a broader period of consolidation extends. The decline in GBP/JPY comes as the Conservative win in December is now fully absorbed by Sterling, but some of the recent declines in the exchange rate will certainly be due to safe-haven demand for the Yen.
Overall, the bias in prices is: Sideways.
The projected upper bound is: 109.40.
The projected lower bound is: 107.68.
The projected closing price is: 108.54.
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 24 white candles and 25 black candles for a net of 1 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 42.6022. 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 43.70. 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 105 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 -75. This is not a topping or bottoming area. The last signal was a buy 0 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 6 period(s) ago.
Rex Takasugi – TD Profile
FOREX JPY= closed up 0.190 at 108.550. Volume was 6% above average (neutral) and Bollinger Bands were 3% narrower than normal.
Open High Low Close Volume___
108.360 108.620 108.250 108.550 89,748
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period 50-period 200-period
Close: 108.81 108.92 108.63
Volatility: 5 5 6
Volume: 61,244 78,148 86,957
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 0.1% below its 200-period moving average and is in an downward trend. Volatility is Our volume indicators reflect volume flowing into and out of JPY= at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on JPY= and have had this outlook for the last 4 periods.