THE EFFICACY OF TECHNICAL ANALYSIS IN THE FOREIGN EXCHANGE MARKET: A CASE STUDY OF THE USD/JPY PAIR

Fernando Teixeira (), Susana Soares Pinheiro Vieira Pescada () and Filipos Ruxho ()
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Fernando Teixeira: Professor Assistant, Instituto Politécnico de Beja, Portugal; Smart Cities Research Center
Susana Soares Pinheiro Vieira Pescada: Professor Assistant, Faculty of Economy, University of Algarve, Portugal; Cin Turs - Research Center for Tourism, Sustainability and Well-being
Filipos Ruxho: Professor Assistant, Faculty of Agribusiness, University Haxhi Zeka of Peja, Kosovo

Sustainable Regional Development Scientific Journal, 2024, vol. I, issue 2, 57-64

Abstract: Financial markets, known for their unpredictability (Lee, 2020), present significant challenges for researchers. Technical analysis, rooted in the principle of market efficiency, focuses on price movements to predict future trends (Fang & Jacobsen, 2024). Originating in the 17th century, technical analysis has gained prominence in modern financial markets (Dongrey, 2022). Technical analysts rely on historical forex data (Garza Sepúlveda et al., 2023) and employ various tools, including candlestick patterns, moving averages, trendlines, resistance levels, and indicators like Bollinger Bands, MACD, RSI, and moving averages, to forecast price movements (Oktaba & Grzywińska-Rąpca, 2024). This study aimed to evaluate the effectiveness of technical analysis in the foreign exchange market by analyzing historical USD/JPY data from 2019, a period unaffected by major global events. The USD/JPY pair was chosen due to its high volatility and economic significance (Fiszeder, 2018 and Peng et al., 2021). Our analysis involved identifying support and resistance levels, trends, and applying various technical indicators to assess their effectiveness in predicting market movements (Mate & Jimeńez, 2021). The findings validate the use of technical analysis tools, demonstrating their ability to identify potential reversal and continuation zones.

Keywords: Financial markets; Forex market; Technical analysis; Exchange rate; Volatility (search for similar items in EconPapers)
JEL-codes: G10 G14 G15 (search for similar items in EconPapers)
Date: 2024
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