BOJ-still-optimistic-about-current-recovery-USD-JPYDaily Chart USD/JPY

The pair is currently trading in a sideways market. We have identified R1 to be a strong ceiling, it has been tested twice and the pair has failed to break this level. R1 is the highest the pair has been since the end of September 2008. Although distant, R2 has been tested once (duration of August 2008) and the pair has failed to break it. Hence, R2 remains a strong roof for the pair.

S1 is an extremely strong floor for the pair, it has been tested seven times and the pair has failed to break it. This will be a key level for traders, if the pair breaks this level, there may be a steep descent to S2. S2 is also an extremely strong secondary floor for the pair, the pair has tested this level three times and has failed to break it.

Technicals: MACD (Moving Average Convergence and Divergence) and MAs (Moving Averages)

·200-day MA (orange) and 50-day MA (magenta) are converging, signalling we may have a crossover fairly soon. If the 50-day MA becomes greater than the 200-day MA then this will signal a bullish stance for the pair.

·MACD has broken previous highs (signalled by the white horizontal line) signalling that the pair is gathering momentum. MACD is above zero and above red signal line signalling a bullish stance for the pair.

In the short term, the pair is neutral. The BOJ and the Fed still require more data to take action. Thus, the USD/JPY will continue to trade in a sideways market. Additional monetary easing will probably be required by the BOJ to ward off deflationary pressures as wage inflation is currently stagnant. Slack in the labour market in the US is being cut, but it will take time to reach the 5.5% unemployment rate that the Fed wants. Due to the time that the BOJ and Fed require, we are unlikely to see any large movements soon. 

Ajay Pankhania
Technical Analyst
Accendo Markets

CFDs, spread betting and FX can result in losses exceeding your initial deposit. They are not suitable for everyone, so please ensure you understand the risks. Seek independent financial advice if necessary. Nothing in this article should be considered a personal recommendation. It does not account for your personal circumstances or appetite for risk.