The USD/JPY closed sharply higher on Tuesday after the release of the Bank of Japan’s monetary policy statement. The price action suggests investors felt the BOJ was dovish in its remarks. The BOJ said it intends to keep rates low for an “extended period of time.”
With the BOJ out of focus for the near future, investors are likely to go back to trading the divergence in monetary policy between the hawkish U.S. Federal Reserve and the dovish Bank of Japan. This likely means a shift in momentum to the upside.
Daily Swing Chart Technical Analysis
The main trend is up according to the daily swing chart. A new main bottom was formed at 110.588. A trade though this bottom will change the main trend to down. A trade through 113.210 will signal a resumption of the uptrend.
The minor trend is also up. A trade through 110.765 will change the minor trend to down.
The major support is a retracement zone at 110.868 to 109.673. This zone provided support for over a week before yesterday’s rally.
The main range is 113.210 to 110.588. Its retracement zone at 111.899 to 112.208 was the primary upside target. The lower or 50% level at 111.899 was reached late Tuesday. Trader reaction to this zone will determine the near-term direction of the market.
Daily Swing Chart Technical Forecast
Based on Tuesday’s close at 111.871, the direction of the USD/JPY on Wednesday is likely to be determined by trader reaction to the 50% level at 111.899.
A sustained move under 111.899 will indicate the presence of sellers. This could lead to a pull-back into a short-term pivot at 111.274. This is followed by 110.868, 110.765 and 110.588.
A sustained move over 111.899 will signal the presence of buyers. This could lead to a quick test of the Fib level at 112.208. This price is the trigger point for an acceleration to the upside with 113.210 the next likely upside target.