Today, on October 28th, the USDJPY exchange rate keeps on trading inside a narrow price range. The price is consolidating close to 107,8 as traders and investors are looking forward to the Fed and BOJ meetings.
According to Mr. Iwata, Deputy Governor of the Bank of Japan, says that the time needed to reach the 2% inflation target can be flexible and is not as precise as a railway schedule. This statement led everyone to believe that the Bank of Japan is not going to implement extra stimuli even amid a price slowdown. Market participants are looking forward to the decisions from the 2 central banks later this week.
It seems like the Bank of Japan cannot be precise about the time needed to reach the 2% inflation target. At this point, the central bank may ease the pressure and to lower the inflation target (this step was abandoned already) or to prolong the time needed to reach the target. The 2-year period announced in 2013 is to end in Spring 2015. If so, the central bank had better hurry up since few economists actually believe that the BOJ is really able to make inflation reach 2% by early 2015. With that said, the inflation projections are unclear.
As far as, the retracement seen in the market of USDJPY is concerned, it is similar to the one seen in the US stock market represented by major stock indices out there.
The bearish tendency we can see now (USDJPY is going down) is going on amid the retracement stage of the international stock market. For instance, Nikkei 225, Japan’s major stock index, is going down as well, which makes the Japanese Yen stronger against the US Dollar and some other major currencies.
Yesterday, the stock indices recovered a bit, thereby closing a little bit higher than Friday’s close. Lower oil prices failed to back stock market growth, especially the energy sector. Another deterrent for risky assets was Germany’s weak business activity. US stock indices managed to regain most of the ground lost during the previous trading session.
The trading volume was ambiguous. Nasdaq saw a sharp decline in the trading volume while NYSE saw a corresponding increase.
Fundamentally strong stocks are setting new highs almost every day, which means that the bullish tendency is gaining strength.
USDJPY Prospects
Traders are waiting for a major decision after the Fed’s FOMC meeting. This meeting is destined to decide the fate of QE3. The US Dollar is weakening while the QE3 is underway. If the program is tapered to zero, we are Kiley to see another way of growth of USDJPY. Still, if the Fed decided to delay the tapering, USD is likely to go further down against JPY and other majors.
With that in mind, Masterforex-V Academy analyzed the H1 chart of USDJPY to find out that the bullish mid-term scenario looks more probable for now. The targets are 108,08 + 108,34 + 109,00 along the blue arrow in the chart below.
Still, amid higher volatility, the price may go down to 107,42 и 107,06 if there is a break below 107,59 backed by the FOMC decision.
