Japanese Yen: USD/JPY (JPY=X) Trade Deal Optimism Providing Support Amid Thin Holiday Volume
The Dollar/Yen settled marginally higher last week while hovering just below the May 30 top at 109.930. The lackluster holiday trading conditions led to a mostly sideways-to-firm trade, but the lack of significant trading volume prevented the Forex pair from generating any significant momentum in either direction.
Optimism around easing trade tensions between the United States and China sapped demand for the usually safe-haven Japanese Yen. To look at it another way, strong demand from risky assets made the low-yielding Japanese Yen a less-attractive investment.
The two economic powerhouses kept news to a minimum last week. Although some investors are concerned over the lack of details from the trade deal as well as uncertainly over when or where it will be signed, the worries weren’t strong enough to encourage investors to seek protection in the Japanese Yen. Furthermore, Washington and Beijing said the delay could be attributed to translation issues.
Beijing said on Wednesday it is in close touch with Washington on a trade deal signing ceremony, a day after U.S. President Donald Trump said he and Chinese President Xi Jinping will have a ceremony to sign the recently struck agreement.
Trump’s comment that a trade agreement is ‘done,’ basically underpinned the USD/JPY all week.
U.S. Economic Data
Last week’s U.S. economic news was mostly disappointing but traders took it in stride.
Core Durable Goods and Durable Goods Orders came in below expectations. New Home Sales also missed their mark as well as the Richmond Manufacturing Index. Weekly Unemployment Claims matched expectations.
Japanese Economic News
In economic news, Japanese retail sales data for November released on Friday came in worse than expected. Retail Sales declined 2.1% in November as compared with a year earlier, government data showed. That was below a median market forecast for a 1.7% decline, according to Reuters. The data follows a sales tax hike that went into effect in October.
Core consumer prices in Tokyo rose 0.8% in December from a year earlier, government data showed on Friday. The core consumer price index for Japan’s capital, which includes oil products but excludes fresh food prices, compared with economists’ median estimate for a 0.6% annual rise.
Japan’s jobless rate fell and the availability of jobs held steady in November, government data showed on Friday. The seasonally adjusted unemployment rate fell to 2.2% in November from 2.4% in the previous month, figures from the Ministry of Internal Affairs and Communications showed. That compared with a median market forecast of 2.4%.
Japan’s industrial output slipped for the second straight month in November, raising the likelihood the economy will contract in the fourth quarter due to slowing demand abroad and at home. Official data showed factory output fell 0.9% in November from the previous month, a slower decline than the 1.4% fall in a Reuters forecast. That followed a downwardly revised 4.5% decline in the previous month, the largest month-on-month slump since the government started compiling the data in comparative form in January 2013.
BOJ Summary of Opinions
A Bank of Japan policymaker played down the chance of meeting a proposal by the International Monetary Fund to tweak the central bank’s 2% inflation target into a looser goal set in a range, a summary of opinions at the BOJ’s December rate review showed, reported Reuters.
As stubbornly low inflation forces the BOJ to maintain a massive stimulus program despite the strain inflicted on financial institutions, the IMF said in a policy proposal in November the BOJ could make its price goal a more flexible one by adopting a target range for price moves, according to Reuters.
The idea runs counter to BOJ Governor Haruhiko Kuroda’s pledge to continue with his “powerful” monetary easing to hit 2% inflation at the earliest date possible, Reuters said.
Overall, the bias in prices is: Sideways.
By the way, prices are vulnerable to a correction towards 108.74.
The projected upper bound is: 110.28.
The projected lower bound is: 108.69.
The projected closing price is: 109.49.
A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 5 white candles and 5 black candles. During the past 50 bars, there have been 25 white candles and 24 black candles for a net of 1 white 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 58.5938. This is not an overbought or oversold reading. The last signal was a sell 7 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 57.22. 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 99 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 20 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 0 period(s) ago.
Rex Takasugi – TD Profile
FOREX JPY= closed up 0.060 at 109.470. Volume was 100% below average (consolidating) and Bollinger Bands were 21% narrower than normal.
Open High Low Close Volume___
109.460 109.470 109.460 109.470 6
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 109.44 108.96 108.70
Volatility: 2 5 6
Volume: 56,283 79,380 87,766
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 0.7% above 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 10 periods.