USDJPY Gains Still Expected Even With Japan Rate DecisionsBy Adam Teen | Tuesday, November 1st, 2016
The USD showed weaknesses through last Friday’s New York trading session, but again recouped those losses later towards the end of Monday’s trading. Last week’s temporary dollar slump came as a result of political sentiments affecting the green buck.
The USDJPY had earlier-on set a three month high (105.537) on Friday before retracting a shock sell-off coming from fresh news that the FBI would open new rounds of investigation on US presidential candidate Hillary Clinton.
Weaker consumer sentiment results did not make it any easier for the dollar. That movement still left the USDJPY trading within a bullish channel spanning over 4 weeks.
Chart: USDJPY firm in a bullish channel
The biggest focus of the morning is the Bank of Japan, expected to give a monetary policy statement, a detailed outlook of the Japanese economy and finally, a policy rate announcement. The Bank of Japan is currently hell-bent on keeping its inflation targets at 2% well into the 2018/2019 financial years.
It is however clear through recent releases that simply carrying out monetary expansion has not been effective on its own in the efforts to boost the economy and meet the inflation targets. Many other tools have to be used and that is why speculation is rife that the policy rate will remain unchanged at negative 0.1%.
Some structural reforms in the economy are needed more than just altering the monetary policy.
Bank Of Japan Policy Announcements in focus
The USDJPY has been drifting higher for most of October. Currently, the USDJPY still holds well within a multiweek bullish channel, with the Friday’s high being the closest it came to penetrating to higher levels.
This makes us maintain our bullish stance on the USDJPY.
In today’s news release, a second attempt towards the 105.53 high is very possible, albeit after a slight retracement before fresh longs push the market. A break of the 105.53 over the rest of the week also means an exposure towards higher range channels even though the price will greatly be limited below 106.00 due to overbuying.
Trade Idea for the USDJPY
With the bullish bias, an attempt was made on the channel resistance on Friday. If the rates remain unchanged, the bullish bias will remain unchanged unless the 103.20 support still holds.
Traders can look towards buying the USDJPY at a slightly lower level than it currently is (104.797) and having Friday’s high as our first target over the rest of the day’s trading.
Suggested entry levels include 104.500 and 104.00, both which are at reasonable levels at the bottom of the rising channel, but also previous resistance levels that turned into support in previous weeks.
*Please note that presented trade ideas are for entertainment only. They do not represent financial advice.Published in News & Analysis