BoJ Rate Decision: How to trade USD/JPY?

Usman Ahmed Forex92

The U.S. Dollar (USD) rose against the Japanese Yen (JPY) last week, increasing the price of the USDJPY pair to more than 103.00, ahead of the release of Japan's interest rate decision.

Technical Analysis

As of this writing, the USDJPY pair consolidates around 103.84. The price is likely to face hurdle near the given below price levels:

Short-Term Resistance Levels

104.25 - A major horizontal resistance

104.75 - The high of December 02, 2020

105.27 - The Fibonacci retracement (61.8%)

On the downside, the pair is likely to find some support near the given below price zone:

Short-Term Support Levels

103.46 - The low of December 29, 2020

102.58 - A major horizontal support

102.00 - The psychological level

Bank of Japan (BOJ) Interest Rate Decision

The bank of Japan (BOJ) is scheduled to decide the new interest rate for the country on Thursday (January 21, 2021). As per the average estimate of economists, Japan's interest rate should remain unchanged at -0.1% in December, as compared to the reading of -0.1% in the month before.

The Bank of Japan's (BOJ) interest rate decision reflects the economic conditions of the country. A hawkish approach by the BOJ towards the inflationary outlook of the country's economy indicates economic growth. On the other hand, if BOJ remains dovish and cuts interest rates, then it signals a weakened economy. Generally speaking, a higher than expected reading suggests a bearish market for the USDJPY pair and vice versa.

Conclusion

Considering the macroeconomic and technical outlook of the pair, here is a short to medium term trading plan for USDJPY:

Sell on a breakout below 103.50 with a stop placed around 104.50 and target around 102.00

Author

Usman Ahmed

Forex92

Usman Ahmed is a currency trader and financial market analyst with more than a decade of active trading experience.

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