USD/JPY Forecast Jan. 28-Feb. 1 – Yen steady as BoJ stays pat on policy

Dollar/yen, had an uneventful week, after posting strong gains a week earlier. The markets will be keeping an eye on the BoJ summary of opinions and retail sales.

USD/JPY fundamental movers

Risk sentiments shot up on Friday, after President Trump’s agreed to reopen government services for a 3-week period. The move will allow Federal government workers to be paid and could pave the way for a full restoration of federal government services. However, this had little effect on the safe-haven yen.

At the Bank of Japan policy meeting, policymakers maintained its huge stimulus program and also lowered its inflation forecast, a strong signal that the bank has no intention of reducing stimulus or raising rates anytime soon, which could dampen enthusiasm for the yen.

See all the main events in the Forex Weekly Outlook

Key news updates for USD/JPY

USD/JPY Technical Analysis

We start with 112.73, an important resistance line in October.

112.25 provided support in early December and it defends the 112 level.

111.65 was a swing low in October, Close by, 111.40 was another swing low in October.

110.40 is next. Below, 109.70 was a swing low in late August and is protecting the symbolic 110 level.

Close by, 109.35 was a cushion in mid-July. 108.70 was a cushion early in the summer and 108.10 a swing low in late May.

107.50 capped the pair in early April.

105.66 was tested earlier in January as the pair dropped sharply.

USD/JPY Daily Chart

USD/JPY Sentiment

I remain bullish on USD/JPY

Risk sentiment has improved after the U.S. shutdown has been put on hold, and if a long-reaching deal is reached between Trump and Congress, the safe-haven yen could become less attractive.

The U.S-China trade war has rocked the stock markets and hurt Japan’s exports to U.S. and Chinese markets. There is, however, optimism that the conflict could ease, with President Trump sounding positive about the talks. A second round of negotiations is scheduled for January 30 in Washington, and investors remain optimistic that trade tensions will ease.

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