Hey guys! I’m looking at a trend trade on USD/JPY! The question is, which direction should I risk on? Here’s the tale of the two charts!
One look at the 1-hour chart tells us that USD/JPY has been on a short-term uptrend for the past couple of days. In fact, earlier this week the pair even hit the 107.00 psychological area before Kuroda’s statements about ruling out the idea of helicopter money in Japan knocked down the pair by about 150 pips. Still, the pair is being supported by a rising trend line now the 100 and 200 SMAs on the chart.
What made me hesitate to start looking for long entries is the daily chart, which showed that USD/JPY is actually sitting on a major area of interest. Turns out that the 107.00 area has served as a solid support in Q2 2016 and is a serving as solid resistance in early June and July. Not only that, but the consolidation around the area also lines up with a falling trend line that’s also just below the 100 SMA. Oh, and don’t forget the overbought stochastic signal!
Fundamentally, it also makes sense to trade two different stories. See, the yen’s recent weakness was largely due to speculations that Shinzo Abe will make it rain by using “helicopter money” tactics to boost the economy. After days of falling and with no further updates though, it seems like the yen bears have lost momentum.
Right now all eyes are on Abe and the BOJ (hey, that could be a band name!) to see if they’ll live up to the market players’ heightened expectations. Word around the hood is that the latest stimulus package could be as large as 30 trillion JPY. On the other hand, BOJ Governor Kuroda already started to put out the fire by nixing the idea of helicopter money.
Analysts expect Japan’s policymakers to present a rough draft to Abe’s Cabinet and muddle through the details in August. In the meantime, any updates on the matter will likely make or break USD/JPY’s uptrend. Hints of a large stimulus package will likely push the pair past the 107.00 resistance area while more cautious statements could set the pair back by at least a couple hundred pips.
How about you? Do you have any bias on USD/JPY? Where do you think it will go in the next few days?