The US dollar has held firm against the Japanese yen currency as the FX market goes into sell the greenback mode ahead of the BOJ policy meeting this week.
Of course the main event will be the policy statement from the new Governor Udea, which is expected to show some minor tweaking of BOJ policy.
What the market is mostly concerned about is going to be Udea’s thoughts on rates and inflation and if he hints that he starts to raise rates at some point this year.
Certainly, traders of the Japanese yen currency should be mindful of the Bank of Japan policy meeting this week as it will be a major market mover.
I would say the meeting has plenty of room for disappointment, especially if Udea underwhelms. In respect for Kuroda he is likely to be muted during this first policy meet.
The key thing to watch this week is that the trend remains short-term bullish while the price trades above the 134.00 level. However, a move under 134.00 could set up a test of the 132.00.
According to the ActivTrader Market Sentiment tool some 71% of traders are bearish towards the USDJPY pair and the other 29% are bullish, which strongly hints that we could see more upside.
With retail traders or participants are too bearish the chances of a price rally to 137.00 are dramatically increased.
USDJPY Short-Term Technical Analysis
Technical analysis on the four-hour time frame shows that the USDJPY pair continues to hold above the Ichimoku Cloud and is short-term bullish above its lagging and base line.
According to the location of the cloud then a break under the 134.00 level should be considered extremely bearish for the USDJPY pair. But currently, a buy signal is in.
USDJPY Medium-Term Technical Analysis
The daily time frame is showing that the USDJPY pair has formed a large a large head and shoulders style pattern. These are amongst the most reliable bearish reversal patterns, and it has been invalidated.
According to Ichimoku analysis the price is working its way towards the Ichimoku Cloud. Better to wait for a trend change of the price moves past the 137.00 level or an activation of the head and shoulders pattern below the 131.00 level.