Improving economic data bearish for USDJPY
Improving industrial production and retail sales are bearish for USDJPY. Will the USDJPY continue the decline?
Data on Thursday showed factory production and consumer spending rose in Japan: industrial production rose 0.6% in November following a 0.5% gain in October, and retail sales in November increased 2.2% from a year earlier. And Bank of Japan meeting minutes showed some policy makers suggested possible tapering of the central bank’s massive stimulus program.
On the daily timeframe USDJPY is retracing after it hit 7-week high in beginning of November. It is testing the 50-day moving average MA(50).
- The Donchian channel indicates no trend yet: it is flat.
- The MACD indicator is above the signal line and the gap is narrowing, which is a bearish signal.
- The Parabolic indicator gives a buy signal.
- The stochastic oscillator is falling but has not breached yet into the oversold zone.
We believe the bearish momentum will continue after the price breaches below the lower Donchian boundary at 112.024. A price point below that level can be used as an entry point for a pending order to sell. The stop loss can be placed above the upper Donchian bound at 113.628. After placing the pending order the stop loss is to be moved every day to the next fractal high, following Parabolic signals. Thus, we are changing the probable profit/loss ratio to the breakeven point. If the price meets the stop-loss level (113.628) without reaching the order we recommend cancelling the order: the market sustains internal changes which were not taken into account.
Technical Analysis Summary
| Position | Sell |
| Sell stop | Below 112.024 |
| Stop loss | Above 113.628 |