After the rapid collapse of USD/JPY last Friday, which market participants attribute to the intervention of the Bank of Japan, on Monday the pair is quickly recovering and at the moment is testing the 149.00 level for a break-up.
The divergence between the monetary policy rate of the Fed and the BoJ is so big that it is unlikely that without continuous intervention the Yen would move to the strengthening. Investors are waiting for the Bank of Japan to make a decision on monetary policy adjustment at the meeting on October 28. The regulator might turn down a rate hike, but it might cut its quantitative easing program.
Today the Japanese Manufacturing PMI showed a decline from 50.8 to 50.7 p. that was better than analysts' forecast of 50.4 p. The Service Business Activity Index grew from 52.2 to 53.0 p. that was also better than the expected 52.1 p.
USD/JPY Technical analysis
Bollinger Bands indicator on the daily period chart is steadily turning in the direction of the uptrend.
MACD indicator remains in the positive range, but formed a weak sell signal, as the indicator histogram shows a slight decline towards the zero line.
Oscillator stochastic came out of the overbought area and continues to decline.
After the pair has consolidated above 149.00, we're going back to buy with a target level of 151.00. Stop loss is set at 148.00.
With a rebound from 149.00 we wait for a breakdown and consolidation of the pair below 148.00. From here we start selling with Take Profit at 146.00. Stop-loss is set at 149.00
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