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USD/JPY statistical and technical analysis

Consumer sentiment is declining according to the best-know indicators in the USA. Greater uncertainty in the global market could cause more volatility for the pair. The current price of the USD/JPY exchange rate is 110.04 (August 31, 2021). Let us therefore now turn to statistical and technical analyzes.

Based on a long-term analysis of historical data, the average positive and negative daily returns are approximately 0.44% and -0.44% , respectively. The estimated daily return in both directions based on their probability of occurrence is 0.22% and -0.22% . YesterdayΒ΄s return was 0.07% , well below the first standard deviation. Our scoring is currently neutral (0 ) for the month-on-month change and 1 for price indexation. This means that we are in the middle phase of the cycle. Both scorings range from -3 up to 3 . The development of the estimated cycles based on our analytical systems is shown in the following chart.

USD/JPY daily price indexation Source: WALFIR

Different moving averages (MAs) help us better identify trends across multiple time frames. We use 3 basic MAs to find out which sentiment dominates each horizon. The purple line represents the monthly , the green line the **6 months **and the yellow line the annual moving average. As we can see in the chart below, all USD/JPY MAs are still in bullish sentiment. In the event of a decline, the monthly MA can be an important support for the exchange rate.

USD/JPY daily price development Source: WALFIR

Since our last analysis, we have witnessed higher upward trend, even though the price is lower. It did not exceed 4 days. The total maximum in the measured period (last 3 years) is 6 days. Downward trends did not exceed more than 3 days in the same period. The total maximum for the last 3 years is 7 days. We could use the average long-term ATR (Average True Range) obtained from daily data (0.54% ) to estimate Stop Loss orders for our positions. The current value is 0.35% , which is below average. Approximately 90% confidence interval (return between -1.00% and 1.00% ) is shown in the histogram below by a red rectangle.

USD/JPY daily return distribution Source: WALFIR

We could use the last decile of low to high returns (1.50% ) to estimate Profit Targets, as shown in the chart below.

USD/JPY daily low to high distribution Source: WALFIR

The basic technical analysis points to side trading. The exchange rate is currently very close to the Fibonacci retracement level of 78.60 , the psychological level of 110.00 and the short-term moving average, which could act as resistance in the event of further growth. The divergence between pair development and the RSI, which was created in July/August, also supports this scenario. The demand zone (green rectangle) looks like an important area.

USD/JPY basic technical analysis Source: TradingView

WALFIR Technologies is one of the three divisions of WALFIR s.r.o., which is based in Slovakia. The primary interests of this division are analytical, quantitative, and algorithmic...

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