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A surprise rate decision is the highlight of this week’s Japanese events, as USD/JPY nears all time lows. Here’s an outlook for the Japanese events and an updated technical analysis for USD/JPY.

USD/JPY daily chart with support and resistance lines on it. Click to enlarge:

dollar yen forecast november 1 5

It seems that the BOJ is still in a wait and see mode, before the FOMC meeting. It’s also important to note that the stabilization in the pair goes hand in hand with a shift in US bond yields. Let’s start:

  1. Average Cash Earnings: Monday, 1:30. Money earned by employers disappointed last month with a very small rise – only 0.4%. This followed many months of strong improvement. This time, a rise of 0.5% is expected.
  2. Monetary Policy Meeting Minutes: Monday, 23:30. The protocols released now aren’t for a recent meeting, so their impact will be relatively weak. Nevertheless, any outlooks for the economy will move the yen.
  3. Rate decision: Friday morning. This meeting of the BOJ was set by surprise. It’s undoubtedly intended as a reaction for the FOMC meeting in the US – a reaction to the huge quantitative easing program that will be announced. If the American program is big, USD/JPY could severely drop, angering Japanese officials. They could decide on actions to counter the American move – an intervention. As usual, the wording of the statement and of the press conference will have a strong impact on the markets.

* All times are GMT.

USD/JPY Technical Analysis

Dollar/Yen managed to jump above 80.90 at the beginning of the week, peaking just under 82. But then it made a sharp fall, and made an all time low close at 80.38 – a new line that didn’t appear last week.

Immediate support appears at 80.38 – the closing spot, which was also reached earlier in the week. Below, the lowest intra-day level of 79.75, reached in 1995, is the ultimate line of support. Below this point, it’s an uncharted area.

Looking up, 80.89, was a low point in the previous week, and worked as a pivotal line this week as well. Above, 82 was the peak in the past week ans also served as resistance earlier in October.

Higher, 82.87 was the line were the BOJ intervened to push the pair higher. It now serves as resistance. 84.11 is the next significant line, providing temporary support for the pair on its way down.

85.93 is the last line for now – this was a stubborn peak that USD/JPY reached after the intervention. There are more lines higher, but they are too far for now.

I remain bullish on USD/JPY.

The chance of intervention rises as we reach historic lows. The BOJ has set an unplanned meeting right after the FOMC meeting to tackle the situation, as exporters complain about the currency. The forex war continues. Why is the yen still rising?

Further reading:

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