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    Technical Analysis USDJPY : 2016-03-28

    Low inflation in Japan

    The Japan’s inflation data came out on Friday. In general, the consumer prices increase was slight with some indicators even falling. The majority of market participants believe this may provide Bank of Japan with additional reasons of monetary easing. Will the yen continue weakening? It will look as growth on the chart.

    Japan’s inflation for February was 0.3% year on year. Bank of Japan while deciding on its monetary policy looks more on the core inflation which excludes food and some other goods> The core inflation was zero year on year while the Bank of Japan aims at pushing the indicator up to 2%. In March its level for Tokyo fell by the record 0.3% since April 2013. The Tokyo consumer price index is considered to be a leading economic indicator for the whole country as it is calculated for the forthcoming month. Now the Bank of Japan issues money and fulfills the QE programme at 80trn yens a year keeping the interest rate at 0.1%. In theory, low inflation may put the BoJ under pressure to expand further monetary stimulus programme or cut the rates. The following BoJ meeting is due on April 28. Currently no details are known. The earliest economic data will be released in Japan on March 29: those are consumer spending, unemployment and retail sales.

     

    USDJPY

    On the daily chart USDJPY: D1 is moving sideways. In recent fortnight the yen has been growing from its 1.5-year low but has not yet reached the upper trend line. The MACD has formed the signal to buy while Parabolic has not reversed yet. The RSI is rising having reached the level of 50. It has been forming the positive divergence for a long time. The Bollinger bands have contracted a lot which means extremely low volatility. The bullish momentum may develop in case the yen prices exceed the last fractal high, the Parabolic indicator, upper trend-line, first Fibonacci retracement and Bollinger band at 114.33. This level may serve the point of entry. The initial risk-limit may be placed below the last fractal low which is the multi-month low at 110.66. Having opened the pending order we shall move the stop to the next fractal low following the Parabolic and Bollinger signals. Thus, we are changing the probable profit/loss ratio to the breakeven point. The most risk-averse traders may switch to the 4-hour chart after the trade and place there a stop-loss moving it in the direction of the trade. If the price meets the stop-loss level at 110.66 without reaching the order at 114.33, we recommend cancelling the position: the market sustains internal changes which were not taken into account.

     

    Position Buy
    Buy stop above 114.33
    Stop loss below 110.66

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