USDJPY TRADING RANGE since 2016

Buying USDJPY is currently one of the most favorable positions for traders. Since 2016 the pair is trading in a range between 108.30 – 114.50

The recent drop to the lower levels of the multiyear range is mainly due to the weakness of the dollar caused by government shutdown events of the last few months. Increasing volatility in the equity markets is pushing investors into safe haven currencies like JPY, and is keeping them away from USD. The strengthening of JPY caused by the huge surplus in Japan’s Balance sheet further boosting Japan’s economy.

Fundamentally USDJPY is a buy opportunity at this level because of the Divergence of the two central banks. FED is known as hawkish and we all expect at least 3 rate hikes in 2018. BOJ is know as dovish and they are trying with all the tools they have, to keep JPY softer or at least to stop it from strengthening.

Technical speaking at this level (107.45) the pair will probably turn on the upside as it has over the last 2 years. Although caution must be in place when buying because a break and close below this level could accelerate losses and push the pair down to 100.00 levels low of September 2016.

BOJ is constantly making manual interventions in order to help JPY become softer and we have seen this many times in the past. A press conference by BOJ’s governor Mr. Kuroda, in 2012, had mentioned that: “we will do anything possible to have a 3 digit number” in the exchange rate of USDJPY.  Concluding that every time the pair is approaching 100 it is time for BOJ to intervene.

 

Be ready for the next FOMC, 64-year-old Jerome Powell previously worked as a partner at private equity firm The Carlyle Group and was nominated to the Fed’s Board of Governors by President Barack Obama in 2011. Powell is expected to gradually raise interest rates three to four times in 2018 with the market watching closely over what he might do. And certainly, even though he has preferred to stay behind the scenes, he will make headlines.