Decline in USD/JPY Volatility: A Precursor to a Significant Trend?【October 20, 2023】

Fundamental Analysis

• The surge in gold prices shows no signs of stopping, and the market is concerned about the prolongation of conflicts in the Middle East.
• The inadequacy of U.S. diplomacy becomes evident as demonstrations intensify from the Middle East to the European region.
• The volatility of USD/JPY is at its lowest since March 2022.

USDJPY Technical Analysis

Analysing the daily chart of the USD/JPY exchange rate. Currently, the average daily volatility is at its lowest since March 2022, fluctuating within a tight range of 149.65 JPY to 149.95 JPY. The statements from U.S. Chairman Powell and the potential for additional rate hikes by the U.S. Federal Reserve are the focal points of the market.

Should a range breakout occur, there is a possibility for the formation of a significant trend. A break to the upside comes with the risk of foreign exchange intervention. If the Middle Eastern situation involves the U.S. and EU, there’s potential for the purchasing of gold and yen, which are considered safe-haven assets.

Day Trading Strategy (Hourly)

Analysing the 1-hour chart of the USD/JPY exchange rate. This week, it’s been fluctuating within an extremely tight range of about 30 Pips. The focus is on the statements by Chairman Powell of the Federal Reserve and U.S. interest rate policies. It continues to hover around the 150 JPY mark, and the RSI is near 50, indicating a lack of directional bias.

There are sporadic selling movements, but they are quickly followed by buying on dips, and there isn’t a strong yen appreciation trend. Considering the fundamentals, there’s potential for movement in either direction, and the market is likely in a phase of seeking direction. Trades should be approached with caution, but aiming for deep dips seems like a good strategy.

Support and Resistance Lines

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

149.85 JPY – Upper limit of the range
149.35 JPY – Lower limit of the range

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.