Bad Day for USD/JPY

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Well, USD/JPY isn’t going to help anyone make money today.

USD/JPY 1 minute

USD/JPY 1 minute

Yes, just a lazy 200 pip M1 move during Asia!

With whipsaws like this thin Asian session trade, it’s quite possible that your day trading stop loss will be knocked out as the market whipsaws. Talks about any looming additions to the bank’s stimulus package will surely keep coming, all the way into the Bank of Japan’s Monetary Policy Statement.

Having said that, the technical nature of markets during times of panic never ceases to amaze:

USD/JPY 4 hour

USD/JPY 4 hour

Which one of you day-traders pulled the trigger here? Give us a mention on the @VantageFX Twitter for a shout out!

Anyway let’s get back on track and take a step back to look at the bigger picture. The daily chart shows that we still have USD/JPY in a huge bearish channel. Each bearish rumour of less than expected stimulus just happens to keep coming out at channel resistance, again highlighting just how technical this over expectant and jumpy market has still been trading:

USD/JPY daily

USD/JPY daily

32/42 analysts surveyed by Bloomberg in July predict that the BoJ will announce further easing. This has meant that the market has been highly expectant, rallying from the previous swing lows on that daily chart on nothing but expectation. And where there’s expectation, there disappointment if it goes unmet.

With Prime Minister Shinzo Abe approving a ¥28 trillion fiscal stimulus package last Wednesday, there is also going to be an inherent expectation on their end for the BoJ to increase their own asset purchasing program, and possible further cuts into negative rates… Now lets not even bring up the words helicopter money!

Technically, price is still 500 pips off that swing low on the daily chart above, where price started rallying in expectation. That leaves a LOT of room for disappointment!

Checking the economic calendar the BOJ statement and the time is listed as tentative. Normally the release time is between 2.30 am GMT and 3.30 am GMT.

Common sense says that the longer the meeting stretches on, the more likely they are to be discussing details and therefore some sort of change (further stimulus) is coming. So the longer outside that time window we get silence, the more edgy and expectant on change USD/JPY will become.

Rumours, innuendos, Tweets, TV presenters poorly translated from Japanese etc are all going to be over-scrutinised, and we know how quickly a headline can move a thin market when traders click their platform first and ask questions later!

You’ve been warned.

This Friday

JPY Monetary Policy Statement

JPY BOJ Outlook Report

JPY BOJ Press Conference

CAD GDP m/m

USD Advance GDP q/q

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This is a guest post originally appeared on Vantage FX. Reposted with permission.

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