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Post-BoJ USD/JPY Decline in Focus Ahead of Policy Meeting Minutes

Post-BoJ USD/JPY Decline in Focus Ahead of Policy Meeting Minutes

Talking Points:

- Post-BoJUSD/JPY Decline to Gather Pace on Less-Dovish Policy Meeting Minutes.

- USD/CAD to Face Larger Correction on Failure to Preserve Bullish RSI Formations.

- USDOLLAR Range Remains if Focus as Mixed U.S. Data Persists.

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USD/JPY Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • The decline in USD/JPY following the Bank of Japan (BoJ) interest rate decision may gather pace over the coming days amid the string of failed attempt to push above the 123.80 (50% expansion), while the Relative Strength Index (RSI) fails to preserve the bullish formation carried over from August.
  • Even though Governor Haruhiko Kuroda keeps the door open to further embark on the easing cycle, the recent comments from the central bank head suggests the bar remains high for the committee to further expand its asset-purchase program, and the dollar-yen may continue to give back the advance from the October low (118.05) should the BoJ Minutes dampen bets for an imminent adjustment to the quantitative/qualitative easing (QQE) program.
  • Despite the decline following the BoJ meeting, the DailyFX Speculative Sentiment Index (SSI) shows retail crowd remains net-long USD/JPY since December 2, but the ratio is holding near recent extremes as it sits at +1.79, with 64% of traders long.


USD/CAD Daily Chart
  • The long-term outlook for USD/CAD remains tilted to the upside as the weaker-than-expected data prints coming out of Canada is likely to put increased pressure on central bank Governor Stephen Poloz to further support the real economy; even though the region comes out of a technical recession, the Bank of Canada (BoC) may implement additional rate-cuts in 2016 as the country continues to adjust to weaker oil prices.
  • Will retain a constructive outlook as the dollar-loonie retains the ascending channel formation from 2014 but, the pair stands at risk for a near-term correction should the RSI come off of oversold territory and fail to retain the bullish formation from back in October.
  • Downside targets are coming on the radar following the failed attempt to break/close above the 1.4000 handle, with the key downside region of interest coming in around 1.3440 (50% expansion) to 1.3460 (61.8% retracement).

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USDOLLAR(Ticker: USDollar):

IndexLastHighLowDaily Change (%)Daily Range (% of ATR)
DJ-FXCM Dollar Index12131.3812142.0312120.020.0340.42%
USDOLLAR Daily Chart

Chart - Created Using FXCM Marketscope 2.0

  • The ongoing mixed data prints coming out of the world’s largest economy may continue to produce range-bound prices in the USDOLLAR as market participants look for a more detailed exit strategy from the 2016 Federal Open Market Committee (FOMC); will retain a constructive outlook for the greenback as Fed Chair Janet Yellen remains upbeat on the economy and sees the central bank on course to achieve the 2% inflation target over the policy horizon.
  • With the annual rotation on tap, comments from St Louis Fed President James Bullard, Kansas City Fed President Esther George, Cleveland Fed President Loretta Mester and Boston Fed President Eric Rosengren will be in focus over the coming months as the central bank looks poised to implement higher borrowing-costs in the year ahead.
  • Will continue to look for near-term support around 12,049 (78.6% retracement) to 12,082 (61.8% expansion, with the topside hurdles stand around 12,273 (161.8% expansion) to 12,296 (100% expansion).

*As we approach the holidays and thus illiquid markets, it's worth reviewing principles that help protect your capital. We call these principles the "Traits of Successful Traders."

Three Factors Warn of Perfect Storm in FX Markets - Caution Advised

Read More:

Price & Time: USDOLLAR - Negative December Seasonality A Dud?

DAX 30: The Euro, the Force Is Strong With This One

USD/JPY Risks Larger Pullback on Dismal US GDP, Sticky Japan CPI

Canadian Dollar Hits 11-yr Low vs. USD on Wholesales Trade Data Miss & Macro Factors

--- Written by David Song, Currency Analyst

To contact David, e-mail Follow me on Twitter at @DavidJSong.

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