Technical Analysis | Trading: 2014-12-12 | IFCM India
IFC Markets Online CFD Broker

Technical Analysis - Trading: 2014-12-12

Yen: new energy age

Energy market reorganization governed by the US shale technology has led to increased volatility of currencies in developed countries. Volatility correlation of commodity prices and liquid instruments such as USD/JPY, GBP/USD suggests that non-commodity prices are currently behaving not in a traditional way. Today we demonstrate the impact of a new energy age on the national Japanese currency with the help of GeWorko model. Export-oriented economy of Japan benefited from fallen commodity prices. The tumbled prices for Brent futures from $77 to $73 and a further price decline allowed the Bank of Japan to continue the economic stimulus by conducting quantitative easing without a sharp increase in inflation risks: the refinancing rate has remained at zero level. The currency market was unambiguous about this event: yen dipped 2% in a few days after the OPEC summit. Note also that the Japanese trade surplus from February to November has grown 46%, while Brent futures tumbled 39%. These values are comparable. The 20-day correlation between the yen and Brent over that period was 66-85%. Usually it corresponds to correlation with the loonie as a commodity currency during the times of a stable market, but certainly not with the yen.

To take advantage of these trends, we consider the spread trading instrument &WTI_JPY, composed using Personal Composite Instrument - PCI technology. The basic part of the instrument includes 1 barrel of the US WTI crude oil, and the quoted part - 100 JPY. Get more details and the online &WTI_JPY chart by clicking here. You can also download the instrument for NetTradeX terminal.

Here we consider the daily closing/opening price chart of the given instrument. It was composed in NetTradeX trading platform. We can see that the exponential moving average is moving along the bearish trend line, confirming the trend. The price crossed it downwards and broke the fractal support at 71.741. At the same time there was a ParabolicSAR reversal in the direction of the red zone.

Another significant sign of the downtrend is the bearish gap, which was formed immediately after the OPEC meeting. Thus, it confirms our hypothesis about the Japanese monetary policy and investor’s reaction on it. We deem that a short position can be opened immediately, or (for conservative traders) after the MACD line breakout at 1.5036. Stop Loss can be opened at the crossover of the moving average and the trend line at 75.947. This mark is also confirmed by the Bill Williams resistance fractal.
PositionSell
Sell stopbelow 70.374
Stop lossabove 75.947
More information about the mechanism of portfolio operations is available on our website section “Quick Guide for Creating and Trading PCI”.

IFCM Trading Academy - New era in Forex education
Pass Your Course:
  • Get Certificate
trading academy

The best trading conditions and high-level services for our clients

We are ready to assist you on any issue 24 hours a day.

Note:
This overview has an informative and tutorial character and is published for free. All the data, included in the overview, are received from public sources, recognized as more or less reliable. Moreover, there is no guarantee that the indicated information is full and precise. Overviews are not updated. The whole information in each overview, including opinion, indicators, charts and anything else, is provided only for familiarization purposes and is not financial advice or а recommendation. The whole text and its any part, as well as the charts cannot be considered as an offer to make a deal with any asset. IFC Markets and its employees under any circumstances are not liable for any action taken by someone else during or after reading the overview.

Close support
Call to Skype Call to WhatsApp Call to telegram Call Back Call to messenger