Trade review and tips for trading the Japanese yen
The price test at 157.46 came as the MACD indicator began moving up from the zero line, confirming a valid entry point to buy the dollar. As a result, the pair rose about 15 pips.
The dollar enjoyed steady demand yesterday despite there being no U.S. data on the calendar. Traders' caution ahead of the Federal Reserve meeting and high oil prices — which continue to burden energy-importing economies such as Japan — supported the dollar. Under those conditions, Japan's data today could have helped the yen, but it didn't. USD/JPY barely reacted and remained under dollar buying pressure.
Two releases came this morning. The corporate services-price index for September rose 3.7%, exactly in line with analysts' expectations and up from 3.5% a month earlier. It shows how services firms charge each other and is one indicator of future consumer-price pressure. More significant was the Bank of Japan's core CPI for September, which came in at 2.4% versus a 1.9% forecast and 1.8% previously. This is the average of three core measures, and such a marked acceleration clearly exceeded expectations.
For the Bank of Japan, this is a serious argument. On Friday, the CPI excluding fresh food also reached 2.1% versus 1.8% previously, so inflation is firmly above the 2% target. Recall the policy rate was raised to 1.25% on September 18, Kazuo Ueda on October 6 confirmed further increases, and on October 15 board member Junko Koeda said the neutral rate is notably above 1%. The market priced roughly a 25% chance of a hike at the October 30 meeting, and today's data could push that probability higher. But the Fed meeting still comes first, and the dollar has the edge, so the yen lacks enough foundations for a pronounced rally. I believe that until the U.S. central bank's decision, USD/JPY will remain driven by dollar and oil sentiment. At the same time, Japanese inflation will become a weighty factor only closer to the BOJ meeting.
For the intraday strategy, I will rely more on Scenarios No. 1 and No. 2.
Scenarios for Buying
Scenario No. 1: I plan to buy USD/JPY today when it reaches an entry point around 157.93 (the green line on the chart), targeting 158.38 (the thicker green line on the chart). Around 158.38, I intend to exit long positions and open short positions in the opposite direction (expecting a 30–35-pip move away from that level). It is best to return to buying the pair on corrections and significant pullbacks in USD/JPY. Important! Before buying, make sure the MACD indicator is above the zero line and is just beginning to rise from it.
Scenario No. 2: I also plan to buy USD/JPY today in the event of two consecutive tests of 157.68 when the MACD indicator is in the oversold area. This will limit the pair's downside potential and lead to an upward reversal. One can expect a rise to the opposite levels of 157.93 and 158.38.
Scenarios for Selling
Scenario No. 1: I plan to sell USD/JPY today only after 157.68 is refreshed (red line on the chart), which will lead to a rapid decline of the pair. The sellers' key target will be 157.28, where I intend to exit shorts and immediately open longs in the opposite direction (expecting a 20–25-pip move in the opposite direction from that level). Sellers will return at any moment — only a hint from the central bank is needed. Important! Before selling, make sure the MACD indicator is below the zero line and is just beginning to decline from it.
Scenario No. 2: I also plan to sell USD/JPY today in the event of two consecutive tests of 157.93 when the MACD indicator is in the overbought area. This will limit the pair's upside potential and lead to a downward reversal. One can expect a decline to the opposite levels of 157.68 and 157.28.
What's on the chart:
Thin green line — entry price where you can buy the instrument.
Thick green line — approximate price where you can place Take Profit or manually lock in profits, because further upside above this level is unlikely.
Thin red line — entry price where you can sell the instrument.
Thick red line — approximate price where you can place Take Profit or manually lock in profits, because further downside below this level is unlikely.
MACD indicator. When entering the market, it's important to consider overbought and oversold zones.
Important. Novice Forex traders must be very cautious when deciding to enter the market. It is best to stay out before major fundamental reports to avoid getting caught in sharp price swings. If you decide to trade during news releases, always place stop orders to minimize losses. Without stop orders, you can quickly lose your entire deposit, especially if you don't use money management and trade large volumes.
Remember: successful trading requires a clear trading plan, like the example above. Spontaneous trade decisions based solely on the immediate market situation are, by definition, a losing strategy for an intraday trader.
