Unlike other currencies, the JPY has been in the background for a while. Unresponsive to most news releases and the beta of the currency pairs. Even though Japan is the 3rd largest economy in the world it has been experiencing a slowdown. Just in the month of June it experienced a 0.1% contraction making this the third time in a row. Real spending decreased by 0.4% and capital spending dropped by 1.4%. This week JPY slightly weakened across the board with USDJPY finding some resistance at 124.50 and EURJPY resistance at 137.00.
Things have not been too good for Japan as a whole. The nation only came out of a recession in the fourth quarter of last year, with current recovery looking quite fragile. Consumption, one of the attributes of aggregate demand in Japan is very low, people are not spending money nor are businesses investing. Domestic demand is not at its best and further fears of a deflation hamper investor sentiment on this currency.
The BoJ has been trying everything to implement economic growth within Japan from fiscal stimulus to monetary easing and even structural reforms. It was only back in 2014 that 80 trillion yen was pumped into the economy to jumpstart economic growth. Things seem to be back to where they were in Japan, where they do not want to be, with the money dissipated into the economy.
Given the principles of Abenomics a weak JPY would be beneficial for Japan, as exports would be more desirable globally resulting in domestic economic growth, but Japan has further been accused of forcibly manipulating the JPY to reach this goal. These accusations were denied by the BoJ.
Focus this week will be on Friday for the JPY. The Monetary policy statement in addition to the BoJ press conference will be held all day. Rates are most likely be unchanged with a further discussion about the current position of the JPY. The bank has also decided to reduce the annual numbers of meetings from 14 to 8 with the possibility of syncing them with the US FOMC meetings.
The USDJPY is fundamentally bearish but technically flat. The USD strength and potential of a rate hike on Friday suggests that the USDJPY may breach the strong 124.50 which has held for the past two trading months. Japan also aims to have a weak JPY passively and if the stock markets rise, this should also help promote weakness. A scenario like this will cause the pair to trade to the highs of 125.85. The technical are giving mixed signals for the USDJPY. Prices are above the 20 SMA and monthly pivot, but the MACD is flat. 124.50 has been a strong barrier, but a breakout and daily close above this level may open a path to the next previous high of 125.85. A move back below 123.50 suggests some weakness on the side of the bulls.
Intraday – The hourly timeframe for the USDJPY was intraday flat. Just a moment ago some data for the States was released which printed negative, causing a sharp decline to the downside. There is intraday support at 125.25 and resistance at 124.45. An hourly close above or below these identified level of support and resistance may suggest a break, followed by a move in the direction of the break.
GBPJPY has been in a range for almost a whole trading month. Support was identified at 191.50 and resistance at 194.00. Today’s daily bullish candle has breached the 194.00 resistance and a daily close above this level may open a path to the monthly R1 of 195.00. Tomorrow also known as power Thursday will be heavily fuelled with releases relating to the GBP. This will heavily affect this setup.
Intraday – The hourly suggest that prices are intraday bullish. There are higher highs and higher lows. Prices reside above the MACD and also the 20 SMA. Research has shown that 80% of the time prices keep between the R2 and S2. The current hourly is looking quite bullish though with prices aiming for 194.50 before the end of the day. Intraday bulls must keep above 193.80 for this intraday bullish bias to hold.
Since the events of Greece have left the limelight, the EURJPY has traded within a range with resistance found at 137.00. Fundamentally the EURJPY remains flat. The lack of events in EUR and the passive nature of the JPY may turn this into a technical price action driven pair. Technically the EURJPY is turning somewhat bearish. The hammer created on the 31st of July followed by a decline to the 135.0 simply suggests that prices may trade to the monthly S2 of 134.477. Technical lagging indicators slowly concur with this statement, with the MACD on route to crossing to the downside.
Intraday – The EURJPY was intraday flat until a few moments ago. Prices surged to the daily pivot 135.585 before declining back down. Intraday bulls may take the EURJPY to the daily pivot before a potential move back down. Bears need a breakdown and hourly close below the 135.00 level for a further decline to the daily S2 of 134.69. A move back above the hourly highs of 135.67 suggest for a further incline to the daily R1 of 135.90
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