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The bears have been tearing into USD/JPY, but is that about to come to an end? Is there a bounce in stars and will it be another opportunity to short?

Bounce Ahead in USD/JPY?

USD/JPY 4-Hour
USD/JPY 4-Hour

For this week I’m throwing up USD/JPY into my watchlist, waiting for a technical setup to play my short bias on the pair.

Fundamentally, we all know that speculation on the BOJ potentially easing up on its Japanese Government Bond purchases brought out the bulls in force over the past week, and on USD side of the pair, rumors of China slowing its U.S. treasury bond purchases (which were later debunked by Chinese officials) and slowing U.S. inflation data had the bears smiling all last week.

But it looks like that sell-off may have run out of steam on a technical basis as the bulls are holding ground around the November swing low just above the 110.00 handle. Stochastic is signaling short-term oversold conditions as well, and we can kind of see a double bottom forming at the moment if the next few candles hold here around 110.50

If the bulls do hold the line and manage to push the pair higher, I’m looking to create a short position around the broken major support area around 112.00, which also happens to be a a 50% retracement move from here. No orders for now, but I’m hoping to get in position this week, ahead of next week’s Bank of Japan monetary policy meeting. BOJ Governor Kuroda has been optimistic on Japan’s economy lately, and I expect to hear more of the same at the next meeting, which could send the yen rallying further.

So, I’m staying on my toes this week to closely watch USD/JPY, and if I do enter a trade, I’ll be sure to update it quickly here in my blog. Until then, stay tuned for updates on my USD/CAD and AUD/CAD trades as well as I’m likely to make adjustments after the Bank of Canada monetary policy meeting.

Thanks for checking me out… good luck and good trading!

This content is strictly for informational purposes only and does not constitute as investment advice. Trading any financial market involves risk. Please read our Risk Disclosure to make sure you understand the risks involved.