USD/JPY Rises, Reacts to BoJ’s Inflation Outlook but Decline Doesn’t Persist【October 18, 2023】

Fundamental Analysis

• US retail sales show steady results, strengthening dollar purchases and leading to a rise in USD/JPY.
• Reacting to the report of the Bank of Japan’s upward revision of its inflation outlook, it sharply dropped to the late 148 JPY range.
• After the sharp decline, it bounced back quickly to the late 149 JPY range.

USDJPY Technical Analysis

Analyzing the daily chart of the USD/JPY exchange rate. After the report of the BoJ’s inflation outlook revision, it sharply declined, but the standard line of the daily Ichimoku Kinko Hyo chart is acting as a support line. Currently, it’s hovering around the 149.70 JPY range, with low volatility and a lack of directional momentum.

The market reacted sensitively to the BoJ’s inflation outlook revision, dropping to the late 148 JPY range in a short time. However, with no major changes in fundamentals, it was seen as a buying opportunity on dips and quickly recovered to the late 149 JPY range. The solid US economic indicators also support the strength of the dollar.

Day Trading Strategy (Hourly)

Analyzing the 1-hour chart of the USD/JPY exchange rate. The market sentiment is 75% bearish, and there is a need to consider the possibility of a sharp rise targeting stop-loss orders. The recent significant level is 150.15 JPY, and if it surpasses this, the next benchmarks seem to be 150.60 JPY and then 151.90 JPY. The market is moving cautiously, and it would be best to wait until a clear direction is established.

On the technical side, the RSI isn’t indicating a clear direction, and the turning line of the Ichimoku Kinko Hyo chart is functioning as a support line. As long as it remains above this turning line, the upward momentum is likely to continue. However, entering around the 150 JPY range might be challenging, and contrarian short-term trading might be more suitable.

The day trading policy is to consider a bounce sale, with an entry at 150.30 JPY, settlement at 149.75 JPY, and a stop at 150.50 JPY.

Support and Resistance Lines

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

150.15 JPY – Rough upper limit
148.73 JPY – Daily Ichimoku Kinko Hyo standard line

Market Sentiment

USDJPY　Sell: 75% Buy: 25%

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.