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Japanese Yen Price Action Settings: USD/JPY, EUR/JPY, GBP/JPY, AUD/JPY -by Ecork

Japanese Yen, Japanese Yen Talking Points:

  • Last night brought about the interest rate decision which got a lot of attention from the Bank of Japan. The BoJ did not make any significant changes to its previous positions despite the bank’s growing expectations to start moving towards a “less pessimistic” policy.
  • Instead, the Bank of Japan continued to say that it will “watch closely” the impact of sharp moves in the currency markets. To read more, see Richard Snow’s previous article titled, Yen falls under BOJ’s protectionist stance, carry trade booms.
  • The analysis in the article is based on price movement And the chart formations. To learn more about price action or chart patterns, check out DailyFX Education Section.

The Bank of Japan’s interest rate meeting last night did not disappoint in terms of volatility, as the Japanese yen took another jump lower after Bank of Japan They avoided modifying their message that they would be “watching closely” the impact of sharp moves in the currency market.

Ahead of the meeting, there were some growing expectations that the Bank of Japan might start to walk away from its very loose policy expenditures. Given the message from all the other central banks that we heard this week, it seemed logical that the BoJ would also take some caution with regards to inflation. Japan just posted its highest inflation reading since 2008, at 2.5%. In the wake of the release of the statements, Kuroda reiterated his message, By saying that the BoJ was waiting for “stable” inflation before adjusting its policy, this gave the JPY another strong move lower..

But soon after his comments, he had to retract some of those notes. Kuroda issued an apology last week for downplaying the impact of inflation on the Japanese public, which when combined with the central bank’s hawkish spending this week made it look as if something might be brewing in Japan.

We heard last night that this is no longer a concern, as the Bank of Japan kept its message without making too many adjustments. to read more, Richard Snow covered it earlier this morning. The USD/JPY has, at this point, regained the bulk of the losses incurred this week, with the pair returning to the psychological level of 135.00.

Four hour chart of USD/JPY

The graph was prepared by James Stanley; USD/JPY on TradingView

Taking a step back, and putting some scope around the interest rate decisions of the FOMC and the Bank of Japan, this brings the potential for an ongoing breakout in the USD/JPY pair.

The Fed just rose by 75 and warned of more hikes on the way. On the other hand, the BoJ is not yet sharing any details of any expected turnarounds, which means that, in conclusion, Kuroda and the BoJ have not been deterred by further yen weakness, at least for now.

Given the way prices have come into the USD/JPY pair, with these concerns emerging around key psychological levels, such as the one we saw at spot rates of 125, 130, and as recently as 135, this could focus on the 140.00 handle in USD/JPY As the “full point” where the Bank of Japan begins to change their words.

This may keep the door open to the possibility of a bullish breakout in the USD/JPY.

USD/JPY daily price chart

USDJPY price chart

The graph was prepared by James Stanley; USD/JPY on TradingView

Euro / Japanese Yen

Perhaps the most exciting part of this development is the potential divergence in forex pairs. As it stands, if we see an upbeat shift in one economy while the BoJ remains disorganized and negative, the potential for trends remains. That’s a lot of what we’ve seen so far this year and that’s one of the reasons why the Bank of Japan is being watched so widely.

As rates increase in the corresponding segments, as we have seen in the US, the attractiveness of long USD/JPY positions also increases due to the increased range of buying potential.

But, higher rates have been priced in the US economy for some time already. What about an economy on the verge of a radical transformation?

The European Central Bank opened the door to raising interest rates with its decision last week. And while the messaging is not done well, the fact remains that the Eurozone is experiencing 8% inflation and a 25bp rise in July is unlikely to help much. Therefore, most likely, some additional transformations around . will be required European Central Bank Which could bring upside potential for the EUR, especially against a currency like the Japanese Yen where no such threat appears to be on the horizon.

In the EUR/JPY, the pair is working on a Morning Star pattern on the daily chart, which indicates a possible bottom on the subject of a pullback. This keeps the door open to challenging previous highs, set at 144.25.

EUR/JPY daily price chart

euro price chart

The graph was prepared by James Stanley; euro/ Japanese Yen in Tradingview

British Pounds / Japanese Yen

The Bank of England is a bit more hawkish than the European Central Bank and has raised interest rates several times this year. This is expected to continue and as we heard yesterday, the BoE expects inflation to rise to 11% later this year. This removes a significant amount of flexibility from the BoE and it is likely that we will hear more rate increases this year.

This reveals the upside for the GBP/JPY and there is a large level sitting a little higher on the chart for the potential for a longer-term breakout. This level is at 168.06 and it has already built a double top formation. Double tops for bearish breakouts are often followed and this possibility was present in yesterday’s trading, with a quick bearish move stopped at the 160.00 psychological level.

Prices have since jumped by 500 points, with a maximum of 625 points. Amazing movement in a short period of time.

4-hour GBP/JPY price chart

gbpjpy four hour chart

The graph was prepared by James Stanley; GBP/ Japanese Yen in Tradingview

The long-term outlook is what attracts here, and if buyers can get another test of resistance, the door opens to the possibility of a longer-term breakout.

From the weekly chart below, we can see that the resistance is playing a role at 61.8% Fibonacci retracement From the 2015-2016 main step. This was an important period in the pair’s history as that covers the Brexit referendum in GBP.

Breaking that resistance opens the door to new seven-year highs.

GBP/JPY weekly chart

GBPJPY Price Chart

The graph was prepared by James Stanley; GBP/JPY on Tradingview

Australian dollar / Japanese yen

There is a similar bullish potential in the AUD/JPY currency pair, with some interaction from the longer-term techniques in the picture.

The psychological levelAt 95.00 it has been well defended in AUD/JPY so far, with some subsequent resistance playing in the 78.6% Fibonacci retracement of the 2007-2008 key move. A 61.8% retracement from the same study was in play a few weeks ago, helping to set the current monthly low after entering as support.

The quick reversal of the yen this week opens the door to the possibility of a bullish breakout here, as the break of that rally from last week points to a new seven-year high.

AUD/JPY Weekly Price Chart

audjpy weekly price chart

The graph was prepared by James Stanley; Australian dollars/ Japanese Yen in Tradingview

— written by James StanleyAnd the Senior strategist for DailyFX.com

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