AlfredTang
Short

Could USDJPY be heading below 108.50?

FX:USDJPY   U.S. Dollar / Japanese Yen
USDJPY             is currently at a strong support level . Will it bounce or break?

I'm inclined to take a sell trade, but I'm going to be very cautious with this idea.

Trend is strongly down recently, but the 108.50 line has held quite strongly over the past year. Every time price hit 108.50 in the past year, it shot back up to around 111.05 within a week. The same could happen here.

Fundamentals:
USD: Negative. President Trump’s decisions seem protectionist and it looks like trade partners like China are reacting with retaliatory tariffs that could hurt demand for USD. DXY             is down, indicating current USD weakness. US Govt             shutdown was short – 3 days only. Unlikely to have long-term effects.

JPY: BoJ to hold policy. No reduction of QE , no shortening of periods. They hold the view that the Japanese economy is growing, which indicates BoJ policies seem to be taking effect. Kuroda’s comments were dovish, which then weakened JPY temporarily. However, overall monetary policy still lending JPY strength. Policy has greater weight than comments because it is decided in conjunction with the other members, not just by Kuroda himself.

Technicals:
Trend: Strongly down recently
Support & Resistance: H4 looks like price attempted to bounce up but isn't really bouncing right now. I want to see how the price moves after the market opens on Monday. If the 108.50 line is broken, price could head for 106.50. If there is a bounce past 109.70, we could see it go back up to 111.05. Above 111.05, I might consider a buy trade.
Indicators: D1 MACD is down. On H4, price looks like it's close to the edge of Bollinger Bands . We may not see much action on Monday in this case.

Risks:
- Price could see a strong bounce upwards from this line as before. Must wait for a strong close below 108.50.
- Strong reports for this week's key USD news would negate my sell idea.

Related news:
  • Trump Speaks, 31 Jan @ 10 am UTC+8
  • ADP Employment Change
  • FOMC Statement
  • Non-Farm Employment Change

Target entry: 108.00 (Price should close strongly below 108.50)
TP: 107.30
SL: 108.60
TP/SL: 70/60 (RR >1.0)
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