Thursday, October 8, 2015

USD/JPY after BoJ and watch out, China's about!

FXStreet (Guatemala) - USD/JPY had been probing the 120 handle for the best part of the late US session having recovered from the lows seen in mid morning trade overnight down at 119.73.

Watch out, China's about!

USD/JPY will be subject to the ebbs and flows in risk-on and risk-off sentiment for the foreseeable future and today the Chinese come back to possibly spoil things up again, and if that is not today, you have to ask yourself when?

The IMF recently downgraded Global Growth forecasts and much of which is stemming from China's latest performances and economic behaviour spoiling what little good was left from the past decade's boom and bust capitalistic strategy.

We might expect more of the same risk aversion as we progress over to 2016 and that should be supportive of the Yen. However, the recent BoJ meeting and subsequent price action tells us that should the BoJ need to act and further ease policy, perhaps as soon as Oct 30th, there is risk to the downside in the Yen and plenty of it before a weaker Yen might be perceived as a risk to the balance of Japanese imports and subsequent negative domestic effects.

The BoJ left things on hold yesterday and more on that can be read about with our preview to that meeting looked into here (BoJ: Little clues on further easing by month-end).

We now look to the end of the month to hear from the BoJ again which carries a greater risk of potential action from the Bank than yesterday's meeting allowing for more time to read into economic activity into the closing weeks for the financial year and holiday seasons where repatriation flows that tend to support the greenback before the year's end could be supportive to USD/JPY. However, a dovish BoJ could be just the countertrade to keep the Yen in balance and within recent ranges. For tomorrow and the dollar, the FOMC minutes will be with us, tipped to be on the dovish side.

USD/JPY neutral/bullish (Spot 120.01, below pivot 120.30, still within familiar ranges)

The bid that had been expected earlier on the BoJ dips below the handle have recovered the price back onto 120 the figure at time of writing, looking for an early push in early Asia to set the price up for Tokyo to take higher, depending on the Asian's risk profile with China back to play.

Technically, the bullish triangle formation that could be emerging was mentioned overnight in the following report. ( USD/JPY: Bullish triangle pattern emerging?)

A break of the 200 DMA at 120.88 opens up 121.76/79, the late August high and the 61.8% retracement while a breakdown to the 118.33 March low en-route to the 2012-2015 116.62 uptrend to confirm a strong bearish trend again.

For a full insight to the recent BoJ meeting, see here (BoJ: Little clues on further easing by month-end).
For more information, read our latest forex news.

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