Japanese Yen: USD/JPY (JPY=X) Trader Reaction to Former Tops Will Set the Tone
The Dollar/Yen is trading lower early Wednesday as currency investors awaited the signing of the U.S.-China trade deal with trepidation. The formal agreement is designed to draw a line under 18-months of back-and-forth tariffs that hurt global economic growth. However, to the surprise of many, the deal will not end the trade dispute between the two economic powerhouses.
U.S. Treasury Secretary Steven Mnuchin said existing tariffs on Chinese goods would stay, pending further talks.
The deal has been priced into the market, but the news that existing tariffs are likely to remain in place until after the 2020 U.S. presidential election is rattling investors. This is leading to a drop in demand for risky assets with money moving into the lower-yielding Japanese Yen.
Daily Swing Chart Technical Analysis
The main trend is up according to the daily swing chart. The trend changed to up on a trade through 109.706. It was reaffirmed when buyers took out 109.728 and the May 30, 2019 main top at 109.930. However, the rally stopped on Tuesday at 110.214, well short of the May 21, 2019 main top at 110.677.
The main trend will change to down on a move through 107.651. This is highly unlikely but there is room for a normal 50% to 61.8% correction.
The first support is a major Fibonacci level at 109.361. The major support is the 50% level at 108.421.
The short-term range is 107.651 to 110.314. Its retracement zone at 108.933 to 108.630 is the next likely downside target zone. It falls inside the major retracement zone.
Daily Swing Chart Technical Forecast
Based on the early price action and the current price at 109.945, the direction of the USD/JPY the rest of the session on Wednesday is likely to be determined by trader reaction to the former top at 109.930.
Overall, the bias in prices is: Sideways.
The projected upper bound is: 110.70.
The projected lower bound is: 109.06.
The projected closing price is: 109.88.
A black body occurred (because prices closed lower 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 25 white candles and 24 black candles for a net of 1 white candles.
An engulfing bearish line occurred (where a black candle’s real body completely contains the previous white candle’s real body). The engulfing bearish pattern is bearish during an uptrend (which appears to be the case with FOREX JPY=). It then signifies that the momentum may be shifting from the bulls to the bears.
If the engulfing bearish pattern occurs during a downtrend, it may be a last engulfing bottom which indicates a bullish reversal. The test to see if this is the case is if the next candle closes above the bottom the current (black) candle’s real body.
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 90.4606. This is an overbought reading. However, a signal is not generated until the Oscillator crosses below 80 The last signal was a buy 8 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 61.77. 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 111 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 103.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a buy 6 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 3 period(s) ago.
Rex Takasugi – TD Profile
FOREX JPY= closed down -0.110 at 109.860. Volume was 1% above average (neutral) and Bollinger Bands were 13% wider than normal.
Open High Low Close Volume___
109.980 110.010 109.770 109.860 84,530
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 109.13 109.04 108.57
Volatility: 6 5 7
Volume: 83,066 78,646 86,938
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 1.2% above its 200-period moving average and is in an upward 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 bullish on JPY= and have had this outlook for the last 2 periods.
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