Japanese Yen, USD/JPY, US Dollar, Bank of Japan, Ueda, Momentum – Talking Points
- US dollar / Japanese yen Stabilized after high ground testing
- The Bank of Japan is in a “do nothing” mode and that could help yen
- If the trend is right, you will American dollar/ Rise of the Japanese yen?
Recommended by Daniel McCarthy
How to trade the US dollar/Japanese yen
The Japanese yen has been a thorn and crown for traders over the past week, offering both headaches and bliss in a wild ride for price action.
The basic background for Japanese monetary policy remains unchanged for the time being despite Kazuo Ueda taking the reins last month as the new Governor of the Bank of Japan.
It appears to be a case of “as is” for technocrats and that may be exactly what the job calls for at a time when other central banks are looking to pause their hawkishness.
The Bank of Japan has a policy rate of -0.10% and they are maintaining yield curve control (YCC) by targeting a +/- 0.50% range around zero for Japanese Government Bonds (JGBs) up to 10 years.
The EUR/JPY made an astronomical rally and broke several previous highs to reach a 15-year high before crashing back into the range.
At the same time, USD/JPY lacked the momentum to carve out new territory to the upside and failed to sustain the upside when it rebounded to familiar levels.
Trade Smart – Subscribe to the DailyFX newsletter
Receive timely and compelling market commentary from the DailyFX team
Subscribe to the newsletter
Technical analysis of the USD/JPY pair
The rise of the USD/JPY pair on Monday this week broke through the upper band of the 21-day simple moving average (SMA) based on Bollinger Bands. Then it closed back inside the range to signal a pause to the upside and what turned out to be a reversal.
Focus ahead is that the currency pair is still in an upward trend channel for the time being but is questioning the bullish momentum.
If USD/JPY closes below 132.50, it will be below the daily moving averages for all period and the positive gradient trend line. From a technical perspective, this could indicate strengthening range trading conditions.
Price action this week revealed 135.11 as a pivot stop and may offer resistance. Moreover, three previous highs in 137.77 – 138.17 area might provide resistance.
On the downside, previous lows at 133.50, 133.00 and 132.00 may offer support ahead of potential support area 129.50 – 129.80.
{{Directory | HOW_TO_TRADE_USDJPY}}
– By Daniel McCarthy, Strategist for DailyFX.com
To get in touch with Daniel, use the comments section below or @employee on Twitter
Comments are closed.