USDJPY Declines as Expectations Grow for BOJ Rate Hike and Reduction in Government Bond Purchases【July 25, 2024】

Fundamental Analysis

• USDJPY appreciates as the yen strengthens due to repeated calls for rate hikes and expectations for next week’s meeting.
• The yen strengthens rapidly, and cross yen pairs also decline across the board.
• The Nikkei 225 Index also drops sharply due to the strengthening yen, with export stocks falling.

USDJPY technical analysis

After confirming the occurrence of a downtrend according to Dow Theory, new selling positions may have been established. USDJPY has clearly fallen below the 90-day moving average and dropped sharply to the 38.2% Fibonacci retracement level.

The rapid appreciation of the yen is due to expectations of a simultaneous reduction in large-scale government bond purchases and a rate hike. Governor Ueda has hinted at the possibility of a simultaneous implementation, which could lead to USDJPY falling below 150 JPY. The ADX is approaching 30, and the -DI is at 38.

Day trading strategy (1 hour)

Analyzing the hourly chart of USDJPY, a rebound can be observed at the 38.2% level. As the pair is oversold, some recovery is expected. The strategy is to target the recovery high. Specifically, draw the Fibonacci retracement connecting the key price levels on the hourly chart, and look to sell around the 50% level.

Entry at 155.45 JPY, with a sell entry at the recovery, and close at 154.50 JPY. A stop is set above 155.90 JPY.

Support/Resistance lines

The support and resistance levels to consider going forward are as follows:

156.18 JPY .. Fibonacci level

153.10 JPY .. Recent low

Market Sentiment

USDJPY Sell: 36% Buy: 64%

Featured Currency Pair of the Week (USDCHF)

The US Dollar-Swiss Franc pair is declining sharply, with a strong dollar selling trend. The candlestick pattern suggests a downtrend, forming a “Three Black Crows” pattern with a large bearish candlestick + four small bullish candlesticks + a large bearish candlestick. The RSI is at 41, indicating ample room for a further decline. A drop to around 0.8820 CHF is anticipated.

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