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Japanese Yen: USD/JPY (JPY=X) traders adjust positions ahead of this week’s interest rate

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Japanese Yen: USD/JPY (JPY=X) traders adjust positions ahead of this week’s interest rate

The Dollar/Yen is trading higher on Monday as traders adjust positions ahead of this week’s interest rate and monetary policy statements from the U.S. Federal Reserve and the Bank of Japan. Increased demand for risky assets is also helping to support the Forex pair as stock market investors resume borrowing from Japanese banks and investing in U.S. equities.

The dollar continues to rise against the Japanese Yen in reaction to Friday’s strong U.S. economic data which led investors to reassess whether the Fed will sound as dovish as expected as anticipated earlier in the week at this week’s monetary policy meeting.

Friday’s stronger-than-expected U.S. retail sales report reduced the chances of an interest rate cut this week, lifting the U.S. Dollar. Nonetheless, in its monetary policy statement, Fed Chairman Jerome Powell is expected to leave open the possibility of future rate cuts.

Expectations of an interest rate cut at the Fed’s June 18-19 meeting fell from 28.3% on Thursday to 21.7% after the retail sales data, according to CME Group’s Fed Watch tool. However, bets for monetary easing at the July meeting remain at 85% and at 70% probability of another reduction in September.

Last week’s economic reports were mixed but the reduction in the chances of a June rate cut indicates that investors don’t expect a rate cut from the Fed at this meeting because the economy is still relatively strong. Some investors feel the need for a rate cut has been driven by trade and geopolitical events and not a weaker economy. However, they are still not certain how “dovish” the Fed will actually sound in its monetary policy statement. Some also believe the Fed runs a risk at sounding “too hawkish”.

According to RBC strategist Elsa Lignos, “Markets are pricing a high probability of a July cut, despite there being unusually high uncertainty, particularly around trade. We find it hard to believe that the Fed would cut rates if post-G20, for example, there were a de-escalation of tensions with China (simply a resumption of talks).”

At this time, it looks as if the markets are willing to concede the Fed will drop the word “patient” in its monetary policy statement, but even a rate cut in July is not a certainty because market sentiment could change rapidly to positive if the U.S. and China decide to resume trade talks after a proposed meeting between U.S. President Trump and Chinese President Xi Jinping takes place at the G20 summit.

Overall, the bias in prices is: Downwards.

By the way, prices are vulnerable to a correction towards 109.84.

The projected upper bound is: 109.47.

The projected lower bound is: 107.51.

The projected closing price is: 108.49.

Candlesticks

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 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.

Three white candles occurred in the last three days. Although these candles were not big enough to create three white soldiers, the steady upward pattern is bullish.

Momentum Indicators

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.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 64.8939. This is not an overbought or oversold reading. 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 39.28. 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 9 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 18. This is not a topping or bottoming area. The last signal was a buy 8 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 4 period(s) ago.

Rex Takasugi – TD Profile

FOREX JPY= closed down -0.010 at 108.540. Volume was 97% below average (consolidating) and Bollinger Bands were 8% wider than normal.

Open High Low Close Volume___
108.530 108.580 108.510 108.540 2,860

Technical Outlook
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bearish

Moving Averages: 10-period 50-period 200-period
Close: 108.45 110.13 111.20
Volatility: 3 6 7
Volume: 80,208 86,481 99,481

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.

Summary

FOREX JPY= is currently 2.4% below its 200-period moving average and is in an downward 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 bearish on JPY= and have had this outlook for the last 31 periods.

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