The BOJ then confirmed market’s expectations by stating in its headline assessment that “Japan’s economy is expanding moderately” with Governor Fukui, once again saying that “The Central Bank will adjust rates gradually”. It is precisely this “moderation” in growth that finds BOJ officials caught between a rock and a hard place. Despite strong export growth and corporate profits, wages in Japan remain stagnant leaving consumer demand moribund. Without the consumer, Japanese expansion remains decidedly lopsided towards capital investment and quite vulnerable to any contraction in global demand especially in US, its second largest export market.

The following technical analysis gives us a detailed lookout on what is expected to happen to USD/JPY

The selling point is at 121.50; triggered by the breaking of the trend line and a failure to reach higher than the previous peak of 121.80; the market swings and change the direction of the minor trend.

- Fibonacci retracement 61.8% represents the take profit at 121.15
- Previous resistance represents the stop loss at 122.20

To strengthen our analysis; we use many other indicators, starting with MACD (Moving Averages convergence divergence); we notice the crossing of the two moving averages above the zero line with high volume and pointing downwards. In order to find the power of the market, we use RSI (Relative Strength Index).With RSI; we can determine that the trend is down and didn’t reach the oversold area.

The zero line of the ROC (Rate of Change) is very important to understand the strength of the market and as we see on the graph; it breaks the zero line and moves downwards. We should always look at the trend line; and in this example it breaks the primary trend and the minor trend is down. The Stochastic is important to use when we have a big movement in the market and we want to know if will continue. William %R is very important tool to know the strength of the market and in this case we see the breaking of -20% lines and pointing downwards. Most of the indicators show us the weakness of the USD against the JPY and the reversal of an up trend that has happened last month

By Finotec’s professional analyst,
Tony B.