Broker Arena

March 15, 2016

Investors Expecting Bank Of Japan’s Policy

Investors Expecting Bank Of Japan’s Policy

What would BOJ do following the easing and negative interest rate policy earlier this year? BOJ might not implement any significant policy two months in a row. At the moment, witnessing the impact of the implemented policy has become a priority as investors being eager to see BOJ’s view on its own policy.

By now, Japanese Yen is being traded on 113.75 per USD. Market’s reaction is quite similar to what happened during the ECB’s interest rate cut. Without any new policy coming, does it mean that Japanese Yen is strengthening? Technically speaking, this currency is in saturated condition in terms of selling on weekly period basis as the widening Bollinger Bands indicator signifying that the accumulation phase is about to take place. The weakening target of Japanese Yen on US Dollars is to around 116.271, where the 50% retracement level of Fibonacci lies.

a

In daily period, the Japanese Yen is in an accumulation phase and a major movement is about to happen. This movement would not occur until the very best moment, which is this week. Fundamentally, the currency could continue its uptrend as it becomes one of the most wanted currencies when the global economy is being challenged by the decreasing of global demand, China’s growth slowdown, and low energy price.

How do we place an open position safely in USDJPY? At the moment, sell position has a higher reward ratio than buy position. With 2.29 reward ratio, we could sell USDJPY on the current price (113.347) along with a stop loss of around 100 pips on breakout level of 114.405 and taking profit on 111.019 (around 235 pips). If the stop loss price is hit, a buy order should be placed on the exact same price with 116.271 as the profit target.

b

Therefore, short position is generally considered as a safe position in spite of a possibility in which the pair would hike after the consolidation phase. We might not be able to predetermine where the price would move to but surely we could create scenarios for all movement possibilities.

P.S : In the education section, basic to intermediate level of information regarding  how to make a technical analysis will be discussed further.

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