Since April, the value of the U.S. dollar (USD) has steadily lost value against the Japanese yen (JPY). Across the Asia Pacific, the USD/JPY cross rate remains a key barometer of a two-way play of global economic fundamentals and risk aversion.
This barometer has experienced many high and low points in the last 26 months. In June 2007, the USD/JPY traded a five-year high of 124.16 to the USD. As far as the fundamentals were concerned, that five-year high was more about a weaker yen, than a stronger U.S. dollar. Over these 26 months, through better and worse, USD/JPY has declined as the yen has appreciated 25 percent against the U.S. dollar.
This 25 percent decline in USD/JPY is illustrated in Chart 1, with the initial change of trend signal appearing soon after the USD/JPY five-year high in June 2007. The red line over the price bars illustrate the MACD predictor (referred to as DiNapoliMP or “DiNapoli MACD predictor”). The regular DiNapoli MACD is shown at the bottom the chart.
The mechanics of the predictor are relatively simple. As shown in the chart when the price of USD/JPY fell below the red line on the price axis (MACD predictor), the corresponding trend as shown on the regular DiNapoli MACD is bearish (the MACD line is below the blue MACD signal line). The advantage of the MACD predictor is it gives a specific point reading on the price axis when the trend on the regular MACD is turning up or down ahead of market action. That price point for mid 2007 was a close below 118.60 for a confirmed bearish trend.
Excel_USDJPY_31 EYARS
