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Short-term Trading Idea FX USD/JPY – Bull Speculation: Growth to 123.45 via Recoil to 120.20

Trading opportunities for currency pair: the Bank of Japan has brought in negative interest rates – minus 0.1%. The yen has weakened against the dollar by 290 points. If the stock markets aren’t swinging, we could see a growth in the pair to 123.45 after a rebound to 120.20. Further growth to cease with a close of the daily candle below 119.55.

Current situation

The Bank of Japan brought in negative interest rates on Friday – minus 0.1%. The regulator undertook such a decision in order to overcome deflation which has been going on for the past decade. The central bank will continue to purchase state bonds in order to increase the amount of money circulating in the economy. The dollar/yen jumped 290 points on news of this to 121.68.

Now to what we can expect from the Japanese yen with the introduction of negative interest rates. The dollar’s strengthening stopped at the 121.68 resistance. The price recoiled from here and on Monday I reckon we’ll see the usual movement against Friday: a fall in this case.

If the stock markets don’t start swinging, after a rebound to 120.20 I reckon we will see a growth in the pair to 123.45. Only a fall in the stock markets and the price of oil could cancel a growth scenario out after the BoJ’s monetary policy decision. Further growth to cease with a close of the daily candle below 119.55.

COT report

The new weekly CFTC (Commodity Futures Trading Commission) report was out on Friday 29/01/2016. The COT (Commitments of Traders) report shows a drop in trader’s open positions from 20/01/2016 to 26/01/2015 inclusive. Friday’s weakening of the yen didn’t make it into the COT report.

Non-Commercial: reduction of short positions by 4,314 contracts to 41,164.Increase of long positions by 8,959 contracts to 92,268.

Non-reportable Positions: short positions down 2,581 contracts to 29,091 and long positions down by 635 to 33,661.

Commercial: long positions on the yen down by 4,136 to 135,020 and short ones up 11,082 to 190,694.

Open interest is up by 4,991 to 281,013.


Vladislav Antonov, Alpari analyst

Monday, 01 Feb, 2016 / 3:09

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