USDJPY strategy - Stay short for 110.30

USD/JPY: BOJ to keep on stimulus to support inflation

Macroeconomic overview:

• At a two-day meeting ending on Thursday, the BOJ is widely expected to keep its short-term interest rate target at minus 0.10% and a pledge to guide 10-year bond yields around zero percent. But the board may discuss whether the BOJ should consider raising its yield targets or slow purchases of exchange-traded funds (ETF) next year, as some members had recently voiced concern over the demerits of prolonged easing.

• Calls from newcomer Goushi Kataoka to increase stimulus to speed up meeting the BOJ's 2% inflation target has not gained support of other board members who are wary of the rising costs of easy policy. Another newcomer, former banker Hitoshi Suzuki, has recently said the BOJ may need to raise its yield targets or slow ETF buying in the future.

• Japan's economy grew an annualised 2.5% in the July-September period to mark a seventh straight quarter of expansion, supporting the BOJ's recent signalling that it could edge away from crisis-mode policy earlier than expected. But core consumer inflation remains stuck at 0.8% and firms polled by the BOJ expect no major pick-up in price growth in coming years.

• BOJ officials have said they do not necessarily need to wait until inflation hits 2% to raise the bond yield targets. We expect the BOJ's next move to be a withdrawal of stimulus, though they do not expect such step to be taken until late 2018. Kuroda's term ends in April, discouraging the BOJ from acting because candidates for the job include premier Shinzo Abe's former aide Etsuro Honda - a vocal advocate of aggressive easing.

• A BOJ survey on Monday showed companies' inflation expectations heightened only a touch in December from three months ago, despite a tight labour market and business confidence at over a decade high.

• Separate data from the Ministry of Finance showed exports grew 16.2% in the year to November, beating a 14.6% gain expected by the market and accelerating from the prior month's 14.0% increase, led by a stellar sales to China and Asia.

• That upbeat outlook on Japan’s economy was highlighted in the BOJ's tankan survey on business sentiment last week, which showed big manufacturers' optimism hit an 11-year high.

Technical analysis:

• Last Wednesday’s long black candlestick weighs heavily on the market, this keeps the bias squarely on the downside. The scope is for losses through 111.95, 61.8% fibo of the 110.85-113.74 rise. Spot has been capped below the tankan line, which is now at 112.87 and stuck within the thick daily cloud, which at the moment spans 111.03-113.55 region.

• We stay short for 110.30

TRADING STRATEGIES SUMMARY:

FOREX - MAJOR PAIRS:

FOREX - MAJOR CROSSES:

PRECIOUS METALS:

How to read these tables?

1. Support/Resistance - three closest important support/resistance levels

2. Position/Trading Idea:
   BUY/SELL - It means we are looking to open LONG/SHORT position at the Entry Price. If the order is filled we will set the suggested Target and Stop-loss level.
   LONG/SHORT - It means we have already taken this position at the Entry Price and expect the rate to go up/down to the Target level.

3. Stop-Loss/Profit Locked In - Sometimes we move the stop-loss level above (in case of LONG) or below (in case of SHORT) the Entry price. This means that we have locked in profit on this position.

4. Risk Factor - green "*" means high level of confidence (low level of uncertainty), grey "**" means medium level of confidence, red "***" means low level of confidence (high level of uncertainty)

5. Position Size (forex) - position size suggested for a USD 10,000 trading account in mini lots. You can calculate your position size as follows: (your account size in USD/USD 10,000) * (our position size). You should always round the result down. For example, if the result was 2.671, your position size should be 2 mini lots. This would be a great tool for your risk management!
   Position size (precious metals) - position size suggested for a USD 10,000 trading account in units. You can calculate your position size as follows: (your account size in USD/USD 10,000) * (our position size).

6. Profit/Loss on recently closed position (forex) - is the amount of pips we have earned/lost on recently closed position. The amount in USD is calculated on the assumption of suggested position size for USD 10,000 trading account.
   Profit/Loss on recently closed position (precious metals) - is profit/loss we have earned/lost per unit on recently closed position. The amount in USD is calculated on the assumption of suggested position size for USD 10,000 trading account.