USD/JPY’s upward momentum weakens; volatility drops to levels seen about a year ago【September 18, 2023】

Fundamental Analysis

• Reports suggest a gap between the comments of the BOJ Governor and market interpretation, but the BOJ’s stance remains unchanged.
• This week, consumer price indices from the UK, Japan, EU, and Canada are scheduled for release.
• Policy interest rates from the US, Japan, and the UK will be announced in the latter half of the week, potentially leading to significant fluctuations in the currency market.

USDJPY Technical Analysis

Analyzing the daily chart of the USD/JPY exchange rate. The daily volatility is at its lowest since October 2022. The upward momentum is weakening, and there seems to be resistance on the upside. Checking the market sentiment, selling has reached 70%.

Currently, it’s barely above the 10-day moving average, but there’s a strong resistance line at 148.08 yen. Thus, even if it breaks 148 yen, expecting a significant surge immediately is risky. Traders should approach with caution, and market participants should conduct their trades with this resistance in mind.

Day Trading Strategy (Hourly)

Analyzing the 1-hour chart of the USD/JPY exchange rate, today’s pivot point is at 147.77 yen. The market opened with a gap, but this gap has now been filled. With the FOMC meeting coming up this week, significant movements are not anticipated. However, comments from officials regarding the statements made by the Bank of Japan’s governor seem to have provided reassurance towards a weak yen trend.

Considering the direction of U.S. policy interest rates and the stance of the Bank of Japan, the likelihood of shifting to a strong yen trend is low. Since it is currently above the 24-day moving average, a dip-buying strategy is deemed effective.

For day trading, the approach is to buy on dips. Entry is planned around the pivot point of 147.77 yen. The stop will be set when the RSI drops below 50 or when it distinctly falls below the 24-day moving average. The target for closing is around 148.08 yen. However, as today is a public holiday in Japan, it might be wise to adopt a wait-and-see approach during Asian trading hours.

Support and Resistance Lines

The resistance line to be considered in the future is as follows

148.08 JPY – Monthly resistance line.
147.77 JPY – Pivot point.

Market Sentiment

USDJPY　Sell: 70% Buy: 30%

Today’s Important Economic Indicators

*Trading advice in this article is not provided by Milton Markets, but by Shu Fujiyasu Jr., a certified technical analyst.