USDJPY Traders Beware We See A Surprise By BOJ Next Week

If you are a USDJPY trader than you should be expecting a big surprise by the Bank of Japan soon most probably by next month which is not far. If you had read our last post, we had correctly pointed out a strengthening of JPY. Now keep this in mind. BOJ does not want a strong JPY. A strong JPY hurts  Japanese exports. It makes Japanese products expensive in the global economy. A Royal Bank of Scotland Group Plc strategist who called the yen’s rally back in October is now telling Japan’s biggest investors not to underestimate the central bank’s ability to weaken the currency.


The above screenshot is the timeline of the various actions that have been taken by the Bank of Japan (BOJ) in the last few years. As said above whenever JPY starts getting too strong just expect some big action by BOJ. Last time also when it happened BOJ increased the stimulus. This is precisely what is expected by BOJ Monetary Policy announcement next month. Bank of Japan is going to increase the stimulus to 100 trillion yen which means it is going to double the purchase of ETFs and may also cut the deposit rate. Now the Federal Reserve is also expected to increase interest rates next month. This is going to make USD strong. So expect a USDJPY bullish rally next month.

US Warns Japan Against JPY Devaluation

As said above markets are anticipating a stimulus increase by BOJ in attempt to devalue JPY. This is not being like by US authorities. The U.S. issued a fresh warning to Japan against competitive currency devaluation on Saturday, exposing a rift on exchange-rate policy that overshadowed a Group of 7 (G-7) finance leaders gathering hosted by the Asian nation. US believes that Japan has not justification whatsoever to intervene in the markets in an attempt to devalue JPY.

In the recent G-7 finance minsters meeting, US has told Japan to stick to its commitment of not meddling in the fx market. After the meeting, however, Japanese Finance Minister Taro Aso said he had told Lew that there had been “rapid, one-sided” moves in the yen’s value. Aso also noted this his exchange with Lew had not been heated.

Whatever we don’t need to worry much what BOJ decision will be. As USDJPY we just need to look at the charts and trade what the candlestick signals as we see them on the Weekly, Daily and H4 charts. Just keep in mind BOJ might increase the stimulus. Last month analysts were expecting an announcement of this sort but BOJ played smart and didn’t say anything which forced USDJPY to plunge down heavily 500 pips.