Friday, January 17, 2014

XJY Japanese Yen Daily Chart Channels

The Fed and BOJ are the markets. This mantra is often repeated these days. The market action clearly illustrates the point. The drop in the yen starting late October created the year-end rally in the Nikkei and US stock markets. The ADX indicates the strength of a trend. Note the flat ADX black line all summer long but in November, as the BOJ continued to bludgeon the yen, sending the XJY lower, and the dollar/yen higher, the ADX moved up into the mid-20's, then above 30, indicating a strong downward trend in place and continuing. However, to begin the new year, the ADX leaks lower and all the sizzle has subsided since it drops under the mid-20's, now at 22. A move under 20 will firmly indicate the downward move in the yen is over.

The green falling wedge, oversold conditions and positive divergence was highlighted to begin the year, expecting a bounce in the yen (lower dollar/yen and lower equities), which occurred. The candlesticks this week tell the central banker story. Today's candlestick is not printed as yet so count back four to the big up candlestick on Monday printing at the top of the blue and brown channels. The stronger yen sent equities lower. Then on Tuesday and Wednesday, note the weaker yen (two red candlesticks), so the dollar/yen catapulted higher from under 103 to 104.70, sending equity markets in rally mode mid-week. Then yesterday the yen strengthens slightly bringing the dollar/yen off the top and creating market weakness. The Fed and BOJ are the markets.

The last couple days price is wrestling with the 20-day MA at 95.71. There are no gaps below so there is no reason for the yen to venture lower. The expectation would be for the yen to continue up through the blue upward-sloping channel. At the least the yen would be expected to stumble sideways through the brown channel. Very simply, if the yen strengthens, the dollar/yen pair drops and equities sell off. If the yen weakens due to BOJ money-printing, the dollar/yen pair moves higher as well as Japan and US stock markets. The dollar/yen is now at 104.40 so that can be used as a pivot. If the dollar/yen moves lower, markets move lower; if the dollar/yen moves higher, markets move higherThis information is for educational and entertainment purposes only.  Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.

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