Japanese Yen: USD/JPY (JPY=X) upside is limited without U.S.-China deal

Japanese Yen: USD/JPY (JPY=X) upside is limited without U.S.-China deal

Japanese Yen: USD/JPY (JPY=X) upside is limited without U.S.-China deal

The Yen bested all but its Swiss rival Tuesday amid fresh tensions between the U.S. and China as well as a turn higher in Japanese government bond yields, although analysts have said there could still be more upside to come.  

President Donald Trump said Tuesday that a ‘phase one deal’ to end the trade war between the U.S. and China could be delayed until after the November 2020 Presidential election, roiling markets that had been led to believe such a thing would be finalised and formally entered into before the year is out. 

And December 15 will still see new tariffs imposed on all of China’s remaining annual trade with the U.S. that’s not yet been subjected to punitive duties unless President Trump decides otherwise. Markets had hoped the levies would be averted by a ‘phase one deal’ but Commerce Secretary Wilbur Ross said at the weekend that if an agreement is not finalised before mid-month the new tariffs will be go into effect. He and Trump repeated that assertion Tuesday.

Trump’s trade comments came amid a Chinese response to the Hong Kong and Xinjiang bills from Washington, which Beijing describes as meddling in its internal affairs, and hard on the heels of a United States Trade Representative (USTR) decision to recommend the White House slap tariffs of up to 100% on $2.4 bn of French exports to the U.S. in response to President Emmanuel Macron’s new digital services tax. 

The trade headlines came at the end of a multi-week period in which volatility in financial markets had fallen off the edge of a cliff as asset prices range-traded amid rising-but-misplaced hopes that a ‘phase one deal’ would end the trade war between the world’s two largest economies before the year is out. They’ve now created a fertile environment for safe-haven currencies like the Yen and Swiss Franc – both of which outperformed on Tuesday after already having clocked up decent gains on Monday. 

“USD/JPY yesterday charted a key day reversal from 109.73. Given the very dense overhead resistance, namely the 200 week moving average at 109.83 and the 2015-2019 downtrend at 110.59, we will assume that the market has topped for now,” says Karen Jones, head of technical analysis at Commerzbank. “While this resistance area caps, near term attention will remain on the recent low at 107.89. Failure here will further alleviate upside pressure and trigger losses to the 106.48 October low.”

Technical Indicators

Overall, the bias in prices is: Sideways.

The projected upper bound is: 109.54.

The projected lower bound is: 107.79.

The projected closing price is: 108.67.

Candlesticks

A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 7 white candles and 3 black candles for a net of 4 white candles. During the past 50 bars, there have been 27 white candles and 22 black candles for a net of 5 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 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 13.3930. This is an oversold reading. However, a signal is not generated until the Oscillator crosses above 20 The last signal was a sell 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 47.33. 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 81 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 -56. This is not a topping or bottoming area. The last signal was a sell 2 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 sell 0 period(s) ago.

Rex Takasugi – TD Profile

FOREX JPY= closed up 0.030 at 108.650. Volume was 98% below average (consolidating) and Bollinger Bands were 43% narrower than normal.

Open     High      Low     Close     Volume___
108.630 108.660 108.600 108.650 2,237
Technical Outlook 
Short Term: Oversold
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period     50-period     200-period
Close: 109.00 108.49 108.88
Volatility: 5 5 7
Volume: 76,468 86,466 89,517

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 0.2% below its 200-period moving average and is in an downward 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 bearish on JPY= and have had this outlook for the last 2 periods.

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