Short-Term and Long-Term JPY Trading Signals

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Short-Term and Long-Term JPY Trading Signals

The Japanese yen is enjoying strong support at the moment, thanks the less dovish than expected Bank of Japan interest rate statement. Earlier this week, BOJ Governor Kuroda decided against expanding their current quantitative easing program, saying that the recently implemented sales tax hike is not yet hurting their economy.

This led to bullish short-term trading signals for the Japanese yen, as traders rushed to liquidate their short yen positions and cancel their sell orders placed in anticipation of a dovish statement. Kuroda also emphasized that the Tankan survey results have printed tremendous progress, although some warning signs can be seen.

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For the longer-run though, traders are still inclined to hold on to their bearish yen biases. After all, the Fed and the BOJ have divergent monetary policy directions, with the Fed starting to reduce their asset purchases gradually and the BOJ still keeping doors open for further easing should economic growth slow down. This leads to long-term buy trading signals for USD/JPY, but it remains to be seen where support could be.

Perhaps one would be better off waiting to short the yen against a currency that has strong economic performance, such as the British pound. The BOE did not disclose a lot of economic details in their latest rate statement but it appears that they are considering hiking interest rates as early as next year. The upcoming release of the BOE meeting minutes could shed more light on whether this is a consensus among most MPC members and if so, there is more upside potential and long trading signals on GBP/JPY.

Traders looking to buy then yen for the short-term could look at weaker performing currencies for trading signals. For instance, the euro is facing a potential rate cut or expansion of LTRO from the ECB so the downside bias for EUR/JPY is lower.

To contact the reporter of the story: James Brennan at james@forexminute.com