BOJ on Watch
USDJPY is trading in a clear holding pattern ahead of the BOJ rate decision due overnight tonight. The bank is widely expected to hike rates by a further .25%. Given that such a move is now priced in, there is a high barrier for a JPY rally with bulls needing to hear a firmly hawkish message from the BOJ signalling further tightening to come. If the bank fails to deliver such a message, JPY is vulnerable to a fresh drop lower as bulls react with disappointment.
Big Risks for JPY
JPY has been a little firmer over recent weeks, mainly owing to a softening in USD from recent highs and a little position covering ahead of the BOJ. Weakness in USD is mainly linked to an absence of trade tariffs so far from President Trump. Having threatened to announce a wave of trade levies on day one, USD has softened amidst their delay. Looking ahead, however, with Trump promising to tariff Mexico and Canada on Feb 1st, there is room for USD to push higher again if those levies are announced. If JPY weakens on the back of a dovish hike from the BOJ and USD rallies through the end of month, USDJPY could easily test last year’s highs in coming weeks.
Technical Views
USDJPY
For now, the pair remains within the bull channel which has framed the recovery off last year’s lows. Price is currently supported by the channel lows and the 154.70 level, keeping focus on a fresh push higher and a test of 160.23 next. To the downside, 152 is the next support to note.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.