Trading volatility: USD/JPY around BoJ rates

IGTV presenter Jeremy Naylor looks at USD/JPY where we are being held near 76.4% Fibonacci support. If there’s a candle close below 140.57 then this would open up a short trade down to 137.

(AI Video Summary)

Awaiting Bank of Japan interest rate decision

Next week, the Bank of Japan will be making an important decision that could impact trading activity. Specifically, they will be deciding on interest rates, which could cause some ups and downs in the market. Right now, the USD/JPY pair is experiencing a series of losses, as the Japanese yen is getting stronger against the US dollar. This all started when Jerome Powell, the head of the US Federal Reserve, hinted that there may be a decrease in interest rates next year if inflation keeps going down. This news prompted investors to move their money from dollars to yen, causing the pair to hit a low point that hasn't been seen in over four months.

Even though it's unlikely that the Bank of Japan will change interest rates, there is a small group of economists who believe that they may start rolling back their current monetary policies in January. On top of that, more than 80% of economists think that the Japanese central bank will do away with negative interest rates by the end of next year. The decision that will be announced on Tuesday could be a turning point, determining whether the dollar keeps falling against the yen or if it finds some support at the level of 140.57.

Fibonacci retracement support level

Traders need to pay close attention to the 76.4% Fibonacci retracement support level, as it is a crucial area to keep an eye on. In the past, the dollar's value against the yen has experienced a sharp increase, causing it to weaken significantly. However, the Japanese authorities didn't intervene at that time. More recently, on November 13th, positive data about the US economy caused the dollar to start declining, which led to an increase in money flowing back into the yen. Currently, the pair has fallen below the 200-day moving average, which hasn't happened since 17 May.

If the key support level of 140.57 has a candle close below it, it could signal a bearish trend. In that case, it would be wise to take a short position with a target of 137.05. On the other hand, if the support level holds, it may indicate an area of strength and could present a good opportunity to enter a long position after the Bank of Japan's decision is announced. In conclusion, the upcoming release from the Bank of Japan has the potential to cause some volatility in trading, so traders should carefully watch the technical indicators and support levels to spot potential opportunities.