USDJPY Timing Composite (5-Component)

Overview
A sophisticated multi-component oscillator designed specifically for intraday USDJPY trading. This indicator combines five key market drivers to provide high-probability timing signals by isolating true USD strength and JPY weakness from noise.

Components & Methodology
The indicator uses z-score normalization (default 20-period lookback) to make five distinct market signals comparable and combines them into a single composite reading:
Primary USD Strength Signals (60%):

-EURUSD (30%) - Inverted EUR/USD measures USD strength against the Euro
USDCHF (30%) - USD strength against the Swiss Franc

Yield Differential (25%):

US02Y (25%) - 2-Year Treasury yield captures Fed policy expectations and carry trade dynamics

JPY Weakness Confirmation (15%):

CHFJPY (7.5%) - CHF/JPY cross isolates JPY-specific weakness
EURJPY (7.5%) - EUR/JPY cross provides additional JPY context


Key Features
✅ Multi-Source Validation - Separates real USD strength from currency-specific noise
✅ JPY Context Filter - Confirms whether moves are driven by USD strength, JPY weakness, or both
✅ Alignment Indicator - Visual dots show when 4+ components agree (high-confidence setups)
✅ Mean-Reversion Zones - Overbought/oversold thresholds at ±1.5 standard deviations
✅ Clean Visualization - Candle-based display (no wicks) for easy interpretation

How to Use
Basic Signals:

Green candles = Bullish USDJPY pressure (USD strengthening / JPY weakening)
Red candles = Bearish USDJPY pressure (USD weakening / JPY strengthening)
Above +1.5 = Overbought zone → look for mean-reversion shorts
Below -1.5 = Oversold zone → look for mean-reversion longs

High-Confidence Setups (Alignment Dots):

Lime dot at top = 4+ components bullish → strong long bias
Magenta dot at bottom = 4+ components bearish → strong short bias
No dots = Mixed signals → reduce position size or wait for clarity

Divergence Trading:

USDJPY makes new high but composite doesn't confirm → potential reversal down
USDJPY makes new low but composite doesn't confirm → potential reversal up


Best Practices
Timeframes: 5-minute to 15-minute charts for intraday trading
Session Focus: London and New York overlap (peak liquidity)
Pair With: Support/resistance levels, volume profile, or session highs/lows
Risk Management: Use alignment indicator to size positions (larger size when dots present)
Weight Adjustments:

Fed data days (CPI, NFP, FOMC): Increase US02Y weight to 30-35%
Pure FX sessions: Increase -EURUSD/USDCHF weights to 35% each
Risk-off events: Monitor CHFJPY/EURJPY for safe-haven JPY flows


Technical Details
Calculation Method: Z-score normalization with configurable lookback period
Default Weights: -EURUSD 30% | USDCHF 30% | US02Y 25% | CHFJPY 7.5% | EURJPY 7.5%
Extreme Threshold: ±1.5 standard deviations (adjustable)
Alignment Trigger: 4 out of 5 components in agreement
Customizable Parameters:

Z-score lookback period (default: 20)
Individual component weights
Extreme threshold levels
Alignment indicator on/off


Advantages Over Simple Indicators
Unlike single-pair or DXY-based indicators, this composite:

Filters false signals - USD strength confirmed by two independent FX pairs
Identifies source of moves - Separates USD dynamics from JPY-specific flows
Reduces noise - JPY crosses prevent misreading EUR/CHF weakness as USD strength
Adapts to regimes - Adjustable weights for different market conditions


Suggested Complementary Analysis

Price action at key technical levels
Session opening ranges
Economic calendar (especially Fed events)
Correlation with US equity markets during risk-off periods
Intermarket analysis with JGB yields for JPY policy context


Disclaimer
This indicator is a technical analysis tool and does not guarantee profitable trades. Always use proper risk management, consider fundamental factors, and backtest any strategy before live trading. Past performance does not indicate future results.