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    Technical Analysis USDJPY : 2016-02-29

    Yen weakens on economic data

    Japan’s January inflation slightly fell in line with preliminary forecasts. This heightens the probability of the further monetary stimulus from the Bank of Japan. Market participants assume some hints may be given on the G20 finance ministers’ meeting. The steps towards limiting global economic risks will be discussed there. Moreover, the positive economic data were released in the US on Friday. Will the yen continue weakening which means strengthening of the USDJPY rate?

    The US GDP second reading for Q4 2015 was surprisingly revised up on Friday. Moreover, the January personal consumption came out better than expected and the February consumer confidence by Michigan University edged up. These facts raise the probability of the Fed rate hike and support the US dollar. Meantime, the Japan’s January inflation was zero year on year as anticipated after its weak growth by 0.2% in December. This raised the chances for the further monetary stimulus by the Bank of Japan which aims for the 2% inflation. In the meanwhile, additional monetary stimulus will support the economy. Investors assume these moves by the Japan’s authorities may be endorsed on the G20 meeting. The Japan’s GDP has been edging down for 3 straight quarters already. As of Q4 2015 end it slumped 1.4% year on year. The Japan’s economy may be in recession or, at least, very close to it. The revised Q4 GDP data will come out on March 7 and may clarify the situation. This week the significant macroeconomic data will be released in Japan early on Monday and Tuesday mornings.


    On the daily chart USDJPY: D1 is correcting upwards from the 16-month low and is trying to form the “double bottom” technical pattern. The Parabolic and MACD indicators have formed the buy signals. The RSI is edging up but has not yet surpassed the level of 50. It has formed the positive divergence. The Bollinger bands have widened a lot which means high volatility. The bullish momentum may develop in case the yen surpasses the level of 114. This level may serve the point of entry. The most risk-averse traders may wait for the last fractal high to be surpassed at 114.9. The initial risk-limit may be placed below the Parabolic signal, the last fractal low and the 16-month low at 110.9. Having opened the pending order we shall move the stop to the next fractal low following the Parabolic and Bollinger signals. 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 at 0.97 without reaching the order at 1.046, we recommend cancelling the position: the market sustains internal changes which were not taken into account.


    Position Buy
    Buy stop above 114 or 114.9
    Stop loss above 110.9

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