Sergey Kamenshikov, Ph.D.
IFC Markets
No further monetary stimulus despite recession
On Thursday the Bank of Japan left the monetary policy unchanged with annual QE volume of 80trn yens. Moreover, other positive news came out. The RSI indicator has formed divergence on the yen chart. Will the Japanese yen continue strengthening?
Some investors have been waiting for the monetary stimulus in Japan to be expanded hoping for the further yen weakening. The Japanese economy has fallen into recession. The GDP for the 3rd quarter decreased 0.2% for the second time in a row but the monetary emission volume was not increased and yen got stronger. On its chart it is seen as the downward movement. The dynamics was supported by the October trade balance surplus of 111.5bn yen which is much better than the expected deficit of 246.3bn yen. Additional positive came from the net volume of the Japanese stocks and bonds acquired by the foreign investors climbing in a week to 573bn yens. Previous week it was 226bn yens. The next important macroeconomic data – inflation and retail sales – will come out in Japan on November 26 and 29.
USDJPY
On the daily chart the USDJPY:D1 has broken down the support of the short-term uptrend. It is above its 200-day moving average. The Parabolic indicator gives sell signal while MACD just began forming the sell signal. The RSI indicator has formed the negative divergence. The Bollinger bands have severely widened which means high volatility. The further bearish trend may develop for the yen in case the Japanese currency surpasses the last fractal low at 122.21. The initial risk-limit may be placed below the last fractal high at 123.76. Having opened the pending order we shall move the stop to the next fractal high following the Bollinger and Parabolic signals every 4 hours. Thus, we are changing the probable profit/loss ratio to the breakeven point. The most risk-averse traders may switch to the 4-hour chart after the trade and place there a stop-loss moving it in the direction of the trade. If the price meets the stop-loss level of 123.76 without reaching the order of 122.21, we recommend cancelling the position: the market sustains internal changes which were not taken into account.
Position Sell
Sell stop below 122.21
Stop loss above 123.76
On Thursday the Bank of Japan left the monetary policy unchanged with annual QE volume of 80trn yens. Moreover, other positive news came out. The RSI indicator has formed divergence on the yen chart. Will the Japanese yen continue strengthening?
Some investors have been waiting for the monetary stimulus in Japan to be expanded hoping for the further yen weakening. The Japanese economy has fallen into recession. The GDP for the 3rd quarter decreased 0.2% for the second time in a row but the monetary emission volume was not increased and yen got stronger. On its chart it is seen as the downward movement. The dynamics was supported by the October trade balance surplus of 111.5bn yen which is much better than the expected deficit of 246.3bn yen. Additional positive came from the net volume of the Japanese stocks and bonds acquired by the foreign investors climbing in a week to 573bn yens. Previous week it was 226bn yens. The next important macroeconomic data – inflation and retail sales – will come out in Japan on November 26 and 29.
USDJPY
On the daily chart the USDJPY:D1 has broken down the support of the short-term uptrend. It is above its 200-day moving average. The Parabolic indicator gives sell signal while MACD just began forming the sell signal. The RSI indicator has formed the negative divergence. The Bollinger bands have severely widened which means high volatility. The further bearish trend may develop for the yen in case the Japanese currency surpasses the last fractal low at 122.21. The initial risk-limit may be placed below the last fractal high at 123.76. Having opened the pending order we shall move the stop to the next fractal high following the Bollinger and Parabolic signals every 4 hours. Thus, we are changing the probable profit/loss ratio to the breakeven point. The most risk-averse traders may switch to the 4-hour chart after the trade and place there a stop-loss moving it in the direction of the trade. If the price meets the stop-loss level of 123.76 without reaching the order of 122.21, we recommend cancelling the position: the market sustains internal changes which were not taken into account.
Position Sell
Sell stop below 122.21
Stop loss above 123.76
This overview has an informative character and is not financial advice or a recommendation. IFCMarkets. Corp. under any circumstances is not liable for any action taken by someone else after reading this article.
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