This weekend was very eventful. While all eyes were on the Paris terror attacks, President Barack Obama met with Russian leader Vladimir Putin on the sidelines of the G-20 meeting in Turkey. They agreed on the need for a Syrian-led and Syrian-owned political transition. Mr. Euro didn’t really react to the news. But Ms. USA seems to be shakin’ and movin’. We’ve got some brand new market events coming from the US and Japan economies this week, so it only makes sense to take a thorough look at the USD/JPY pair’s moves on the forex dance floor. Without further ado, I bring to you: Ms. USA (US dollar) and Mr. Japan (Japanese Yen).
1- Japan’s Economy Hits Recession
The world’s third largest economy is in trouble. Japan’s Cabinet Office announced Monday that gross domestic product (GDP), fell at an annualized rate of 0.8% in the July-September quarter, which is 2015’s third quarter.
Coming up, we have the Bank of Japan (BoJ)’s interest rate decision this Thursday during the Asian session. Even though calls for additional stimulus have intensified due to weakening economic conditions in Japan, in the past few months, in a true Japanese “anti-panic” fashion, BOJ policymakers maintained that they have been seeing signs of progress and that there is no need to increase their current level of asset purchases.
A key goal of “Abenomics” which was introduced by Prime Minister Shinzo Abe, has been to spur very low inflation by convincing businesses to grant wage hikes and make capital investments. The BOJ is expected to reiterate that their QE program is having its intended effect and that they would keep calm and carry on until their 2% inflation target is reached.
With that, Mr. Japan might also keep it chill on the forex dance floor and let his major counterparts take the lead. Talking about Japan’s Herbivore Men!
2- FOMC Meeting Minutes Coming Up
As I mentioned in my previous updates, Fed head Janet Yellen has bluntly said that the Federal Reserve could raise interest rates in December 2015, although the raise could be very small and gradual. Now, Invest Divas are expecting more definitive clues that the Fed is on track towards Ms. Yellen’s words. Beware of great disappointments!
The upcoming FOMC minutes release should show whether or not more policymakers are gearing up for a rate hike next month. If majority of Fed officials express eagerness to tighten, the Ms. USA might be in for further upside until the end of the year. On the other hand, the lack of any rate hike commitment from the Fed could drag her down on the forex dance floor.
The minutes are scheduled to be released on Thursday at 8 PM GMT.
3- USD/JPY Has Moved Up a Level
As I’ve mentioned over and over again, this pair loves to dance sideways. It’s just its thing. After dancing sideways for 2.5 months since August 24th between 118.50 and 121.50, the pair finally leveled up beginning of November (also known as Movember, which kinda makes sense) and is now dancing between 121.50 and 123.50. The fact that it broke above the Ichimoku cloud and the key resistance of 121.50, increased the chances of the pair’s new up-moves.
121.50 is now turned into a support level, and is very important to keep and eye on it. It could stop the pair from falling further down.
Investing Strategy
Adding the fundamentals and technicals to our Diamond Analysis bowl, it seems the pair could face further up-moves. The resistance is now set at 123.50 and 125 in extension. With the upcoming events this week, we could see the pair traveling between 121.50 and 123.50, giving range traders a chance. A break above 123.50 could open doors for further rises towards 125.
In any case, set your stop loss and profit targets a little loose from the below levels, because the naughty currency pairs sometimes change their mind right before a psychological level just to piss the forex trading crowd off. This technique helps you avoid getting kicked out of your trading position prematurely.
Here are the recommended supports and resistance levels* for short term forex trading strategies:
| Support Levels | Turning Point | Resistance Levels |
|---|---|---|
| 118.50 | 120 | 123.50 |
| 116.50 | 121.50 | 125 |
*Important Note: The support and resistance levels are not suitable for all traders and largely depend on your account size, margin and leverage. Book a private lesson to learn how to personalize your account based on our trading guide.
