Monday, February 4, 2013

Is USD/JPY Exhausted Yet? FXY Update With Fibonacci Retracement

USD/JPY's massive rally since November has been pricing in future money printing by the Bank of Japan (read: The Yen Broke Down Recently Because Japan's Abe Wants the BoJ to Print Money Like Crazy to Spark Inflation -DV; USD/JPY declined on Expanding Monetary Base -DailyFX), but there has to be a corrective move at some point. It broke above 80.70 resistance on November 14, 2012 and rallied all the way up to 93.18 at today's high. So where is the ultimate exhaustion point, 95 resistance? Or will USD/JPY violate its minor uptrend line here, correct to the major uptrend line from November, and reevaluate from there. The slide in the yen (dollar/yen spike) appears to be helping Japan's economy by making its exports cheaper. But it's really just part of the global currency war in play, which could get more interesting down the road if central banks deviate from agreements or push their limits to save their economies. But how low can the yen go before commodity imports get too expensive for Japan?

I wrote a blog post on FXY, the Japanese Yen ETF, the other day because its RSI (relative strength index) hit a very oversold level (10) a few days earlier. It was, and still is, camping out in oversold territory (currently at 27), and I said to watch the 104-107 area to see if it could form a base for a correction. Since then it traded down to 105.46, which is interestingly the 61.8% Fibonacci retracement from the August 2008 low/October 2011 high! By the way, I have no idea what central banks are planning globally, so I'd use all of this technical analysis with a grain of salt. I linked to a bunch of articles after the charts.

Source: FreeStockCharts.com (Daily Chart since July 2012)

Source: FreeStockCharts.com (Daily Chart since July 2011)

Source: FreeStockCharts.com (Weekly Chart since 2008)

Source: StockCharts.com (Daily since 2008)

Source: StockCharts.com (Daily since 2011)


*G-20 to Focus on Recovery, but Currencies May Prove Disruptive (WSJ, 2/4/2013)
*Forex News: USD/JPY declined on Expanding Monetary Base (Daily FX at Yahoo Finance, 2/3/2013)

"The Takeaway: Japan’s monetary base rose 10.9 percent in January -> Monetary base is expected to rise further in early 2014 -> USD/JPY declined"

*G20 should focus on debts, not Japan-bashing: Russia (Reuters, 2/1/2013)
*Moody’s: Japan Stimulus Likely To Lift Economy Out Of Recession; Growth Likely Temporary (Forex Live, 2/1/2013)



*Japan factory output up, firms expect recovery (Reuters, 1/31/2013)
*Korea Becomes the Red Flag for Asia's Currency War (Reuters at CNBC, 1/31/2013)
*Japan PM shrugs off global criticism over latest stimulus steps (Reuters, 1/30/2013)
*Bank of Japan deputy governor signals readiness to ease (Reuters, 1/30/2013)
*A 100-Yen Dollar Can’t Fix Japan’s Woes, Says Citi’s Englander (WSJ, 1/31/2013)
*Japan approves $1.02 trillion budget for 2013/14, borrowing at new highs (Reuters, 1/29/2013)
*Japan To Cut Planned Bond Sales (WSJ, 1/29/2013)



*Japan Price Slide Shows Risks From BOJ Delay in Easing: Economy (Bloomberg News, 1/24/2013)
*JAPAN REPORTS RECORD $78.3B TRADE DEFICIT IN 2012 (AP, 1/23/2013)

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