USD/JPY (JPY=X) bulls hesitate, but don’t give up ahead of BOJ
- USD benefited from solid local data but also from an ultra-dovish ECB.
- BOJ expected to maintain the status quo after reducing again its bond-buying.
The USD/JPY pair has trimmed its Wednesday losses entering positive territory mid-US session, after bottoming at 109.91. The recovery was a combination of solid US data and an ultra-dovish ECB. US Retail Sales surged in May 0.8%, doubling market’s forecast of 0.4%. The Control Group figure came in at 0.5%, beating expectations of 0.4%. Additionally boosting the greenback was EUR’s crash after the ECB’s dovish announcement. Despite actually forecasting the end of QE, the central bank decided to keep rates on hold at least all through next summer, quite a disappointment. But the fact is that the Fed hike rates on Wednesday and upgraded its dot plot to 4 rate hikes this year. The market gave up on the greenback after the event as hawkish as expected, but surely ultra-hawkish when compared to dovish Draghi.
The Bank of Japan is having a monetary policy meeting during the upcoming session but it is expected to be a non-event. During the past Asian session, the BOJ reduced its purchases of 3-5Y JGBs from 330bn Yen to 300bn Yen, something that the market tends to see as the beginning of an exit strategy. So far Kuroda has denied it and said that inflation is well below the target, and these cuts are just part of their strategy to maintain the yield-curve under control. Any deviation of what the BOJ has offered lately will be a shocker.
In the meantime, the 4 hours chart shows that the pair briefly broke below the key Fibonacci support at 110.15 but holds above it, while technical indicators regained the upside, heading into the Asian session with upward slopes but well below their previous weekly highs. Moving averages in the mentioned chart remain well below the current level and with no clear directional strength. Mild-bullish, the pair needs to surpass its weekly high of 110.84 to complete a 100% retracement to May’s high of 111.39.
Overall, the bias in prices is: Upwards.
The projected upper bound is: 111.89.
The projected lower bound is: 109.56.
The projected closing price is: 110.72.
A white body occurred (because prices closed higher 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 27 white candles and 23 black candles for a net of 4 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 81.3256. This is an overbought reading. However, a signal is not generated until the Oscillator crosses below 80 The last signal was a sell 5 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 61.97. 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 sell 17 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 124.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a buy 10 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 4 period(s) ago.
Rex Takasugi – TD Profile
FOREX JPY= closed up 0.030 at 110.650. Volume was 98% below average (consolidating) and Bollinger Bands were 16% narrower than normal.
Open High Low Close Volume___
110.610 110.670 110.590 110.650 2,481
Short Term: Overbought
Intermediate Term: Bearish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 110.09 109.19 110.23
Volatility: 5 7 8
Volume: 88,032 98,423 105,052
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 0.4% above its 200-period moving average and is in an downward trend. Volatility is relatively normal 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 13 periods.
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