Free Profitable Forex Newsletter
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No change in BOJ policy pushes USDJPY above 130
USDJPY broke above the 130.00 level on strong momentum today following the BOJ meeting, where they stayed fully committed to their dovish policies. The Bank of Japan reiterated that they will continue conducting QE & YCC purchases of Japanese Government Bonds (JGB) in order to defend the 0.25% yield cap on the 10-year bond that they’ve set for themselves with the YCC
policy. Effectively, the BOJ didn’t do anything to stop or, at least slow down, the JPY’s decline.
Today’s decisions from the BOJ are as much of a green light for further JPY weakness as you can get. At this point, it is clear that the BOJ is not worried too much about the excessive JPY weakness. Although they have expressed vocal concern a few times, the lack of action speaks volumes to traders.
This means the bullish USDJPY trend remains intact. The focus is now shifting toward the 135.00 area as the next target higher. In line with this, we are looking to enter long to ride a potential new bullish leg in this pair.
USDJPY to reach 135 soon?
To join this trend, look to enter around current levels (130.70) or lower if we get some consolidation here. There were already a few “attempts” to retrace some gains today, most notably on comments from Japan’s Ministry of Finance saying “excess FX volatility is undesirable”. Still, airing such a message only a few hours after the uber-dovish BOJ can only have so much
effect. USDJPY pared back the losses quickly and is now again near the highs of the day.
Thus, any retracements are likely to be shallow here and stay well above the now broken 130.00 level. In this regard, however, a word of caution is worth repeating here still. And that is that US Treasury yields and global stock indices should remain on our radar when trading JPY. In fact, now that the BOJ clearly won’t help its currency, these two factors can play a much
bigger role in reversing/retracing the JPY losses or extending them. For now, the trends of higher Treasury yields and relatively stable stock markets remain intact, which is bearish for JPY and should help to propel USDJPY further higher in the coming days (going into next week’s Fed meeting).
Entry:
- Look to enter around current levels (130.70) or lower in case of a retracement;
Stop loss:
- Below 129.20.
- This 129.20 level roughly corresponds with the previous swing high (Apr 20) and the 50% point of the powerful burst higher this morning on the BOJ decision (see 1H chart below). Such big momentum candles can be used as a stop out point, as it is often this 50% line that is important for short-term market sentiment. The market should not go below it if the uptrend is going to continue as expected.
Targets:
- 1st - 133.00 - 133.50 (a notable Fibonacci zone)
- 2nd & main target - 135.00 area
- Use a trailing stop and take profits as the trend progresses higher. Trend indicators like Parabolic SAR can be used to trail the stop.
- It will be no surprise if this trend also extends above 135 in the coming weeks
Trade signals from the past weeks
- April 22, 2022 - Long AUDNZD not triggered as the market broke through the 1.09 support without any bounce/reaction; longer-term, AUDNZD remains interesting, as discussed last week and could potentially complete a significant upside breakout
TOTAL P/L in the past week: N/A
TOTAL: +5540 pips profit since October 1, 2018
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Any opinions, news, research, predictions, analyses, prices or other information contained in this newsletter is provided as general market commentary and does not constitute investment advice. FX Trading Revolution will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.
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