Yen steadies as BoJ policy meeting starts

The BoJ has started a two day monetary policy meeting today. Market focus is on whether BoJ will decide to raise interest rates for the first time in six year. On the one hand, a report from financial daily Nihon Keizai Shimbun said that a majority of the BoJ’s nine-member policy board believes that economic growth and rising consumer prices warrant raising rates. On the other hand, FM Tanigaki continues to persuade BoJ to keep the ZIRP as he sees no rush in raising rates.

Aussie is boosted by strong payroll data today which shows increase in 52k jobs in Jun versus expectation of 10k increase, raising the chance that RBA will hike on Aug 3. Unemployment remains steady at 4.9%. Recent rebound in fold is also providing additional support to AUD and further rally to 0.76 level is in sight.


Daily Pivots: (S1) 114.53; (P) 115.12; (R1) 116.09

USD/JPY’s retreat from 115.70 has reached below 115.14 minor support with hourly MACD turned below signal line. An intraday top is form at 115.70 and bias is turned mildly on the downside for 38.2% retracement of 113.39 to 115.70 at 114.81.

However, as discussed before, breaking of the short term trend line resistance indicates corrective fall from 116.69 has completed at 113.39 already, slightly above 113.37 cluster support. We’d expect further rebound to retest 116.69 as long as the current retreat from 115.70 is contained above 114.27 support (61.8% retracement of 113.39 to 115.70 at 114.27). But a drop below 114.27 will starts to argue the rebound from 113.39 has completed already and risk retest of this low.

In a bigger picture, USD/JPY’s rebound from 108.99 has completed at 116.69, after failing to break firmly above fibo resistance of 116.65 (61.8% retracement of 121.38 to 108.99). Subsequent fall with daily MACD turned below signal line confirms a short term top is formed at 116.69 already and consolidation has started.

However, we would not be too bearish on USD/JPY yet. The strength and time of the rebound form 108.99 is suggesting that the whole fall from 121.38 have completed with 3 waves down to 108.99 and further rally is still in favor to follow towards 118.88 resistance. As long as USD/JPY’s retreat from 116.69 is contained by this 113.19/37 cluster support, we’ll prefer to treat the price action from 116.69 as sideway consolidation only, that means, further rally is still expected later after finishing the consolidation and bring a break above 116.69 cluster resistance to 118.88 level.

However, regardless of different interpretation, a firm break below 113.19/37 cluster support will indicate a deeper decline is underway which could push USD/JPY further lower towards 61.8% retracement of 108.99 to 116.69 at 111.93 or lower.

USD/JPY Hourly Chart - Forex Newsletters, Forex Outlook, Forex Review, Forex Signal

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Shing-Ip Tsui (Shing) is the founder and CEO of ActionForex is set up with the aim to empower individual forex traders by providing insightful contents. Analysis reports, live pivot points on majors and crosses, etc are provided with collection of carefully selected educational articles and free trading ebook downloads.