USD/JPY Signal Update
Last Thursday’s signal expired without being triggered as there was no bearish price action at the first touch of the 110.00 level.
Today’s USD/JPY Signal
No signal is given today.
USD/JPY Analysis
We were already looking at this pair last week as close to the heart of what was going on in the Forex market, which has been dominated for a while now by the themes of a strong USD and a weak JPY. During the earlier part of last week, the USD was not behaving strongly, but JPY weakness kept this pair up, and it was the JPY crosses that were really moving. However upon the release of the FOMC statement last Wednesday the USD strengthened and this pair reached a high of around 109.35 which looked to be a natural swing high. This pair then cooled off but on Friday morning the Bank of Japan surprised the market by announcing a further programme of quantitative easing. This naturally had the effect of dramatically weakening the JPY within minutes, and consequently we are trading above 112.50 at a six-year high.
Due to this parabolic rise, it is difficult to see how to enter any new positions, as the nearest obvious support is at the 110.00 level. It might be that 112.50 could be psychologically key enough to see buying there if we return to that level soon, but it is very difficult to judge.
For these reasons, all that I can say for the time being are hold onto existing longs, but wait for a while to enter any new longs.
I do not see any really obvious resistance before 115.00.
At 3pm London time today there will be a release of U.S. ISM Manufacturing data, which is likely to have an impact upon the USD. Today is a public holiday in Japan. Under normal conditions today could be expected to be a pretty quiet day, but as the JPY weakened dramatically at the end of last week and the USD is the strongest currency, we should expect continued volatility today.