Currency Shares Japanese Yen Trust (
is declining sharply following weaker than expected trade data
released by the government on Monday. The increase in
Japan's trade deficit coincides with a momentum sell signal that
will keep the currency on the defensive. This
is the most liquid of the Japanese yen ETFs, and follows the
movements of the exchange rate between the Japanese Yen versus
the US dollar.
Japan reported a record large trade deficit in March of nearly
1.45 trillion yen, which was about 40% larger than economists had
expected. Many consider a trade deficit to be negative for
an economy as well as a currency as a nation that consistently
runs a deficit is borrowing from abroad and selling off domestic
asset to finance purchases of goods and services. For
example, Japan would sell yen to purchase items outside of
The trade deficit reflects a slump in exports, which only
climbed 1.8% year over year. Imports were up more than
expected. The 18.1% increase from a year ago was twice the rise
in February and above the 16.2% consensus forecast by
On April 24, Japan is scheduled to report its March inflation
figures. A lower than expected Consumer Price Index could
force the Bank of Japan to generate additional monetary stimulus
to avoid deflation.
The most interesting readings will focus on the Tokyo's
Consumer Price Index which will include the new sales tax
increase. The headline rate is expected to surge to 3.1%
from 1.3%. Since economists expect a relatively high
inflation figure, there is the risk of a disappointing rise in
the CPI which could further erode the value of the yen.
Momentum on FXY has turned negative as the MACD (
moving average convergence divergence
) index generated a sell signal. This occurs when the
spread (the 12-day moving average minus the 26-day moving
average) crosses below the 9-day moving average of the
spread. The MACD index moved from positive to negative
territory which confirms the MACD crossover sell signal.
The 5-day moving average is poised to cross below the 20-day
moving average. When this occurs, a short term down trend
is generally considered in place.
FXY Support and Resistance
The next level of target support for the FXY is seen near an
upward sloping trend line that connects the low made in December
of 2013 and the low made in early April. The slope of this
trend line comes in near $94 per share.
Resistance is seen near a downward sloping trend line that
connects the high in February to the highs in March in creates a
slope that comes in near $94.25.
The weekly chart of FXY shows that the ETF is currently in a
prolonged downtrend that began in the summer of 2012.
Target resistance is $90 per share, which coincides with the lows
made during October of 2008. Additionally, a weekly channel band
has been created, and the lower end of the channel coincides with
the low created during October 2008.
Trading the FXY
Investors looking to take advantage of the downward momentum
in FXY could short the ETF near the 20-day moving average at
$95.20. I recommend using the downward sloping trend line, near
$96.50, as a level to place at stop.
Investors could consider taking profits near $90.00, which
coincides with the October 2008 lows. That would translate into a
profit of 5%. Longer term investor could consider riding
the trend down to the lows made in June of 2007 near $81.
This would translate into a profit of 15%.
Triple your dividends with one stock - starting this
With so many investors grabbing up shares of blue chips, yield
is getting hard to come by. In fact, the average yield of
the Dow has sunk to 2.1%. But our group of investors isn't
worried. We're collecting big monthly dividends…
up to $550 every 30 days
… from a little-known investment that
yields a whopping 12%
! If you'd like to tap into this income stream, and earn up
to triple the dividends of even the best blue chip,
click here for our full report on this