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USD/JPY Jumps To ¥111 Despite Stealth Taper By Bank of Japan

USD/JPY Jumps To ¥111 Despite Stealth Taper By Bank of Japan

Tyler Yell, CMT, Currency Strategist

USD/JPY Rate Forecast Talking Points:

  • The ONE Thing: After a month of consolidation, the uptrend in USD/JPY looks ready to resume. Technical studies show a strong resumption higher off the Ichimoku Cloud and higher within the rising channel drawn off previous pivots.
  • The stealth taper where the Bank of Japan noted they are cutting bond purchases does not seem to worry Yen Bears.
  • After the announcement by the BoJ, implied volatility took a hit showing that options traders betting on downside are likely losing their confidence, which could pave the way for further USD/JPY gains.
  • Trade wars have been in the news. If you’re not familiar with trade wars and their history,We've got you covered


Overall Bias: Bullish above the Ichimoku Cloud

  • Resistance: ¥111.40 per USD, May 21 high
  • Spot: ¥110.65 per USD
  • Support ¥110.08, ¥109.59 9-day midpoint, 55-DMA respectively

Bank of Japan Cuts Bond Purchases, Markets Sell JPY Anyway

The Bank of Japan must be feeling good as they were able to appease exporting firms in Japan while at the same time communicating that there reducing their bond purchases without seeing the JPY strengthen. Communication from central banks about reducing easing measures or accommodation has been met with currency strength as seen best via the US Dollar and the Fed or the Euro and the European Central Bank.

However, Japanese Yen bears were able to give a sigh of relief as the yen looks to remain low especially against and globally appreciating US Dollar.

See what we see when looking at the Japanese Yen. Check out our new Q2 Yen Forecast here.

Keep Watching the Trade War Updates for JPY Direction

Earlier in the week, JPY weakened aggressively from ¥109.40 to above ¥110 after US Trade Advisor, Peter Navarro soothed markets by telling the market that Trump’s policies have been misunderstood. The spike on Monday showed that markets remain keenly focused on trade effects and the JPY.

Adding to the debate about the effects of trade restrictions to the benefit of one economy at the expense of another, Toyota Motor Corporation spoke against auto tariffs that have been posited by the US. Trader should be on the lookout for a similar move in the JPY as we saw in the Chinese Yuan this week where the devaluation or weakening should not be seen apart from the tougher trade stance as trade negotiations continue.

It’s not that Japan would outright weaken the JPY to support their largest exporter in Toyota, but Japan surely does not want a stronger JPY (any more than they ever have) if tariffs are to encourage offshoring.

USDJPY Chart: The Price Held Above Ichimoku, Now Faces Resistance

Please add a description for the image.

Chart Source: IG UK Price Feed. Created by Tyler Yell, CMT

USD/JPY traders should be aware that the market is sitting at a key zone of resistance as Q2 comes to a close. ¥111 in USDJPY, and ¥111.40 are both worth the attention of bears as a definitive move higher from here would weaken any argument they hold.

Additionally, Friday marks month- and quarter-end so we could see some fresh volatility as the kick off of H2 2018 tends to lead to fresh positions. Another risk to the upside from my view is the combination of a bullish posture on the chart per Ichimoku alongside the eroding entrenched bearishness among macro traders. A further erosion may lead to more position clearing next week that could take us higher yet.

New to Ichimoku? Click here for a free guide if you’d like to learn more

More For Your Trading:

Are you looking for longer-term analysis on the U.S. Dollar? Our DailyFX Forecasts for Q3 have a section for each major currency, and we also offer an excess of resources on USD-pairs such as EUR/USD, GBP/USD, USD/JPY, AUD/USD. Traders can also stay up with near-term positioning via our popular and free IG Client Sentiment Indicator.

Forex Trading Resources

DailyFX offers a surplus of helpful trading tools, indicators, and resources to help traders. For those looking for trading ideas, our IG Client Sentiment shows the positioning of retail traders with actual live trades and positions.

Our trading guides bring our DailyFX Quarterly Forecasts and our Top Trading Opportunities, and our real-time news feedhas intra-day interactions from the DailyFX team. And if you’re looking for real-time analysis, our DailyFX Webinars offer numerous sessions each week in which you can see how and why we’re looking at what we’re looking at.

If you’re looking for educational information, our New to FX guide is there to help new(er) traders while our Traits of Successful Traders research is built to help sharpen the skill set by focusing on risk and trade management.

---Written by Tyler Yell, CMT

Tyler Yell is a Chartered Market Technician. Tyler provides Technical analysis that is powered by fundamental factors on key markets as well as t1rading educational resources. Read more of Tyler’s Technical reports via his bio page.

Communicate with Tyler and have your shout below by posting in the comments area. Feel free to include your market views as well.

Discuss this market with Tyler in the live webinar, FX Closing Bell, Weekdays Monday-Thursday at 3 pm ET.

Talk markets on twitter @ForexYell

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