BoJ Maintains Pace of Stimulus; USD/JPY Tests First Line of Resistance

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104

This week, the USD/JPY slid from a high of 102.64 to 101.60 on Thursday. Ahead of the BoJ’s monetary policy meeting, traders bought USD/JPY back to 102, a price level which is becoming sticky – you saw price consolidate around 102 during the 6/11 session.

Kuroda
(Haruhiko Kuroda, Governor of the BoJ)

The Bank of Japan voted unanimously to keep the current pace of stimulus, and to boost the monetary base by 60-70 trillion yen annually. The bank did mention improved economic conditions both domestically and abroad, but maintained that the current monetary policy is appropriate until it get get inflation to the 2% target.

BoJ official statemen (pdf)

After the bank policy announcement, traders faded USD/JPY from 102, but kept it above the 101.60 low and traded it back up to 102 by the time the 6/13 US session started.
Price is still sticky around 102, but there is a near-term bullish bias based on the price action before and after the the BoJ announcement.

usdjpy 6/13

Resistance:
However, the near-term rally has some resistance to deal with or it is within the context of a bearish development. The 4H chart below shows 3 falling trendlines that reflect a bearish development. The current rally is testing the first one. A break above 102.15 should clear this trendline as well as a previous high, and thus signal the bullish outlook toward 102.79 – 103. However, more clues will be needed such as ability to hold above the sticky 102 level, and ability to extend above the second and third falling resistance lines (seen in the 4H chart)

Bearish Scenario:
However, if price ends up falling below 102 to end the week, the bearish momentum from this week will be maintained (the 1H RSI would hold below 60, which reflects bearish momentum).

usdjpy 4h chart 6/13

The 4H chart shows that the market has been sliding from the 102.79 high from last week. The  Failure to break above 102.15 and a fall below 102 keeps the 101.42 then 100.82 support pivots in sight.

To contact the reporter of this story, email Fan Yang at fan@forexminute.com
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Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.