Talking Points:
- USD/JPY Pauses Ahead of FOMC
- Bullish Brekaouts Considered Above 110.38; Bearish Below 109.63
- What’s next for the US Dollar & Yen? Learn more with our market forecasts
The USD/JPY has declined as much as 118 pips from last Friday’s high. Now prices are consolidating ahead of key central banking news to be released later in the week. Tomorrow traders will be watching the FOMC rate decision, which is expected to see key interest rates raised to 1.25%. This is followed by the Bank of Japan on Friday, which is slated to keep their policy rate at -0.10%. Going into these events, traders should continue to monitor key values of support and resistance for the USD/JPY to pinpoint potential market breakouts.
Technically, traders should note that the USD/JPY is consolidating with an inside bar pattern. If prices close near present values, the USD/JPY will have failed to exceed either Monday’s low or high. For reference Monday’s high may be considered a point of resistance at 110.38. Alternatively, Monday’s low at 109.83 may be seen as a value of support. Traders may continue to monitor these points during tomorrow’s news event for a potential breakout. In the event of a bullish breakout, traders may look to target the previous swing high at 110.81. Bearish breakouts however, open the market to test new monthly lows at 109.11.
USD/JPY Daily Chart with Range
Sentiment for the USD/JPY remains net positive, with IG Client Sentiment reading at +1.77. This sentiment value suggests that 64% of traders are currently net-long the market. Typically sentiment is read as a contrarian indicator, which may suggest that the USD/JPY may decline further. In the event of a bearish breakout below 109.63, traders should look for sentiment figures to move to a positive extreme of +2.0 or more. Alternatively, if the USD/JPY breaks higher, traders may look for sentiment figures to move back towards a more neutral value or potentially flip net negative.
Why and how do we use IG Client Sentiment in trading? See our guide.
--- Written by Walker, Analyst for DailyFX.com
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