Skip to Content
News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.

Free Trading Guides
Subscribe
Please try again
Select

Live Webinar Events

0

Economic Calendar Events

0

Notify me about

Live Webinar Events
Economic Calendar Events

H

High

M

Medium

L

Low
More View More
Japanese Yen Outlook: JPY Poised for Breakout Ahead of BoJ Rate Decision

Japanese Yen Outlook: JPY Poised for Breakout Ahead of BoJ Rate Decision

What's on this page

USD/JPY ANALYSIS

Advertisement

JAPANESE YENFUNDAMENTAL BACKDROP

The related safe-haven Japanese Yen rallied this week with the Evergrande crisis gaining traction and devastating global markets. Investors are exhibiting risk averse behavior which may be premature but prefer to err on the side of caution. The Japanese bond market echoes this sentiment as foreign investment increases (see graphic below) and may continue should the current uncertain macroeconomic backdrop endure.

foreign investment japanese government bonds

Source: Refinitiv

JAPANESE AND U.S. CENTRAL BANKS TO MEET TOMORROW

According to Refinitiv, there is a 97.79% chance of the BoJ keeping rates unchanged which then shifts focus to the Federal Reserve meeting tomorrow – see calendar below.

USD/JPY economic calendar

Source: DailyFX economic calendar

Markets will be tuned in to an impending taper which and guidance on how the Fed will go about recent data which include inflation figured far exceeding the average 2% target (yellow), lackluster jobs data (purple) and lingering COVID-19 concerns (pink) – refer to graphic below. This could delay a quicker start to tapering current asset purchases and support additional Yen strength.

U.S. economic data

Source: Refinitiv

USD/JPY TECHNICAL ANALYSIS

JPY Forecast
JPY Forecast
Recommended by Warren Venketas
Get Your Free JPY Forecast
Get My Guide

USD/JPY Daily Chart:

USD/JPY daily chart

Chart prepared by Warren Venketas, IG

The daily USD/JPY chart above outlines the weeks fall as price action tests the symmetrical triangle support line (black). Prior attempts to break and close below the 38.2% Fibonacci 109.25 (Fibonacci taken from June 2015 high to June 2016 low) level have been unsuccessful but a confirmation close below this area of confluence may open up further downside opportunity.

Key resistance levels:

  • 110.00
  • 100-day Exponential Moving Average (EMA) - yellow

Key support levels:

  • 109.25 – 38.2% Fibonacci level
  • 109.00
  • 108.72 – August swing low

IG CLIENT SENTIMENT FAVORS SHORT-TERM DOWNSIDE

USD/JPY Mixed
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily -3% 2% 1%
Weekly 4% 3% 3%
Learn how to use Sentiment in your trading strategy
Get My Guide

IGCS shows retail traders are currently net long on USD/JPY, with 55% of traders currently holding long positions (as of this writing). At DailyFX we take a contrarian view on sentiment which suggests further downside on the pair.

Trade Smarter - Sign up for the DailyFX Newsletter

Receive timely and compelling market commentary from the DailyFX team

Subscribe to Newsletter

--- Written by Warren Venketas for DailyFX.com

Contact and follow Warren on Twitter: @WVenketas

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES