This is a relatively quiet week for news in the Forex.
However, there are some numbers coming out on Thursday that should provide some movement in the USD/JPY and other JPY based or quoted pairs. The announcement could put an early end to the current downslide we have been experiencing in the USD/JPY pair. The news I am watching is Japanese CPI. Speculation is currently biased towards low numbers which could spell trouble for the Japanese economy. This is particularly important as it may also indicate that the Japanese raised their interest rates from zero too soon this July.
Last month’s CPI numbers were a little stronger than expected but rising oil prices may have had a lot to do with that and without continued pressure from wage growth and consumer spending the JPY could begin to weaken again. This has been a trend for a few years now against most of the other major currencies in the market. I am interested in this announcement because of the recent retracement, which could mark a bottom and provide a new entry for a long position. While things are certain to move a little this week before the announcement, I have placed a fib retracement on the chart below to illustrate a potential support level at 50% that could lead to a nice bounce.
Source: Prophet.net
I am waiting for the news to come out before taking any particular position. On a personal note, I like playing Japanese announcements because they usually are released during the afternoon quiet period in the Forex trading day. This particular announcement is currently scheduled for 7:30 PM Eastern on Thursday so most of its impact will be felt through Friday’s trading. I would also add that although sometimes I am willing to take a predetermined position prior to an announcement, I would not recommend that in this case. The market seems so convinced that this will be a negative release that if it surprises to the positive, the move could be immediate and dramatic to the opposite side.
John Jagerson is a writer about and active trader in the Forex. His book,
Profiting With Forex, published by McGraw Hill, is available in bookstores nationwide. This author also develops Forex education courses for INVESTools.com.