Japanese Yen to React on the US or Chinese Factors?
On Thursday the US FOMC left the key interest rate unchanged at 0-0.25%. The decision was based on the sluggish labour market recovery and the inflationary expectations. That day the US currency lost its positions against the most liquid instruments. The Japanese yen is no exception as it advanced more than 4% in one day.
Still, the long-term investors tend to be pessimistic. They have lost faith in the growth model of the Chinese economy that is the demand driver in Asia. Shall we expect the long-term weakening of the Japanese yen and which of the factors is the key one?
On the weekly chart we are currently seeing the ongoing bullish momentum in the USD/JPY pair. In the meantime, the last days show the price localization within the triangle which suggests the uncertainty. In this case the oscillator signals are crucial. The RSI Bars oscillator is on increase stopping near the double top. We assume that this level’s breakout will provoke the volatility and the surge of the currency pair. The signal is likely to be accompanied by leaving the triangle.
We suggest opening the delayed order to buy after the RSI breakout of 48%. The risk limits are to be fixed at the level of the previous Bill Williams fractal low of 118.436 (the base of the triangle). This level was the support of the Bollinger® channel before the trend weakening. The stop shall be moved every day to the next low following the parabolic signal. By doing this we change the profit/loss ratio in our favour. Despite the high probability of the above scenario the currency pair may lose its bullish momentum. This is mostly due to the weak US statistics. Nevertheless, we believe that the oscillator signal works out only in case of the long-term fundamental trend.
- Position: Buy
- Buy stop: above 121.722
- Stop loss: below 118.436