Brent oil is currently on a bullish trend, facing resistance near $84 and supported by the 200-day EMA. Breaking above this level could lead to a climb towards $90. Short-term support is observed around $80, backed by the 50-day EMA. As summer approaches and travel increases, crude oil tends to benefit from seasonal patterns. Despite temporary setbacks, buying...
JPY: troublesome times
2020-02-19 • Updated
On the outside
We have left the JPY aside for a while, and now it is time to take it back from the shelve and see what’s happening in the Country of the Rising Sun. Unfortunately, nothing promising. Clearly, the extent of trade ties with China puts Japan in the frontline to suffer the damage done by the Coronavirus, after China itself. 20% of Japanese exports get shipped across the Yellow Sea, 25% of Japanese total imports originate from its western neighbor. That’s one of the largest proportions of trade balance tied up with the Chinese economy among all countries. Logically, the stronger the bond is with your trade partner, the harder you are hit if your partner takes the damage. Therefore, that is a fundamental factor to drag the JPY down, even if it is considered as a #2 safe-haven currency.
On the inside
Domestically, the Japanese economy is shrinking at an alarming rate. It is not entirely unexpected, because the sales tax introduced in Autumn 2019 couldn’t have come without notice. But still, knowing that the Japanese economy, the third-largest globally, slows down at a pace unseen during the last 6 years, raises reasonable concerns. Take note, the contraction pace has been recorded before the virus stroke, so it is purely an internal factor, which just got the “right timing” to be aggravated by the virus externally. Now, if the first quarter of 2020 shows a similar downturn, it will be an official recession now. Japanese officials said that the last time things looked alike was 2011 when the natural disasters caused a nuclear meltdown in the country, which led to tourist-starvation in Japan for almost half a year. Obviously, all of this doesn’t do any good to the JPY neither (unless you look at it from the Japanese exporters’ perspective, but again: if the biggest chunk of your exports cannot be bought by your partner, what’s the use of selling them cheaper).
As a result, the JPY cannot hold its ground against the USD. Even with the depressed market moods dipping into the flee-to-safe-haven mode on a regular basis because of the virus cannot ignite the interest for the JPY. Trading at 110.43, the USD/JPY is looking at 110.70, which is May-2019 resistance. If things continue the same way (which they are pretty likely to), we have a good chance to see USD/JPY eventually beat the 2019 highs and aim at those of 2018.
Bearish Scenario: Sales below 78.99 with TP1: 77.93, TP2: 77.45, and upon its breakout TP3: 76.56 and TP4: 75.70 Bullish Scenario: Purchases above 78.00 (wait for a pullback to this area) with TP1: 1679.00 (uncovered POC*), TP2: 79.33, and TP3: 79.66 intraday
Bearish Scenario: Sales below 80.00 with TP1: 79.34, TP2: 78.94, TP3: 78.55, and 78.00 Bullish Scenario: Buys above 78.00 (wait for a retracement to the zone) with TP: 79.34 TP2: 80.00, and TP3: 81.00
Bullish Scenario: Buys above 17910 with TP:18098.07, TP2:18277, and TP3: 18415 Bearish Scenario: Sells below 17850 with TP1:17730, TP2: 17700
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