USD/JPY falls ahead of BoJ and Fed policy meetings
James Chen, CMT January 30, 2017 3:15 PM
- USD/JPY dropped back below 114.00 as the Japanese yen surged on Monday, ahead of the Bank of Japan’s (BoJ) monetary policy decision and statement scheduled for early Tuesday in Japan.
- The BoJ is not expected to make any substantial changes to its negative interest rate policy or its extensive quantitative easing program at the current time.
- The yen has generally been strengthening since the beginning of the new year as the US dollar has lagged, prompting a sharp pullback for USD/JPY.
- The past two weeks have seen a double-bottom chart pattern around 112.50 for USD/JPY, which could potentially serve as an upside reversal of January’s pullback.
- The double-bottoming pattern occurred at a key support level right around the 38% Fibonacci retracement of the uptrend from early-November to mid-December.
- The outlook for the US dollar continues to be bullish overall in view of US President Trump’s broad fiscal stimulus plans and the Federal Reserve’s increasingly hawkish stance. The Fed holds its policy meeting on Wednesday – no further interest rate hike is expected then, but any more hawkish talk could boost the dollar.
- The bullish bias for USD/JPY is further supported by the monetary policy divergence between the Fed and BoJ, as well as low safe-haven demand for the yen in the midst of extended rallies in global equity markets.
- If the 112.50 support level holds after this week’s Bank of Japan and Fed meetings, a USD/JPY rebound could push the currency pair back up towards 118.00 and a potential resumption of the underlying bullish trend.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.