2016/08/03 — Technical Analysis — Looking at Market Trends and Oscillators USD/JPY
By Kian Lavasani, Market Analyst, MultiBank Exchange Group
The Japanese yen is about 12 percent up on the USD YTD, giving it a solid record for one of the world’s best-performing currencies. After the Japanese fiscal stimulus announcement last week, a sharp drop off has bitten into the small bullish reversals we were seeing the previous few days. The 28 trillion-yen ($265 billion) stimulus package that includes 13 trillion yen in fiscal measures had been under heated discussion for months. It’s important to keep these market sentiments and fundamental analysis views in the background when looking to our technical analysis for trends and opportunities. Let’s take a look at our technical tools and see a matter-of-fact vantage on the current situation.
USD/JPY was holding steady ground around 105.100 for the past week, following the 28th a mild Bollinger squeeze hinted at the resulting fallout, if you continue to follow the bands we can see they are slowly coming together again. Keep watch on this for a possible jump upwards, the resulting fall has hit some solid support levels giving an opportunity for this bullish reversal. A brief look at the Stochastic lines indicates a rising strength for the bullish traders, it looks as if our buyers are trying to push the price back up but as our Stochastic lines approach the 80 line we can summarize that the bullish strength may be all but exhausted. If this occurs this would contradict our previous analysis from the bands so keep a close watch and see how our active traders fair. Looking next to our ADX lines they are trailing at an all-time low for the past month, this rising indecision among traders surmounts the idea that sentiments still haven’t settled from last week and no specific trend has formed yet. Next examining our Parabolic SAR dots we seem to have reached a bullish reversal opportunity, the distance between the candlesticks and dots have become closer and closer almost overlapping. Give close watch to this indicator over the next few periods for a buy signal as our determined bulls push back from bearish domination. Looking next to the two custom moving average lines in the main chart, orange (exponential, 25-period) and red (simple, 10-period). Examining these is a good way to clear the air for where we stand whether in bullish or bearish waters. Our SMA 10(red) is sitting healthily below our EMA 25(orange) after having crossed downwards in the earlier week. This is a strong indication that we may see a bullish reversal, since some of our other indicators are leading to a similar conclusion this can be used as a confirmation in our overall analysis.
The next few periods will be crucial in determining the upcoming trend for this currency pair; keep close watch for other confirming indicators before jumping in and remember to watch for strong sentiments in the market over BOJ’s decisions in the coming month regarding the fiscal stimulus package.
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