Current trend

Quotes of the USD/JPY pair are trading around 142.60, trying to cosolidate above the resistance level of 142.15 in order to continue the upward movement after the decision of the Bank of Japan on monetary policy.

Last Friday, July 28, the Japanese regulator once again left the interest rate unchanged at -0.10%. However, in comments to their decision, officials pledged more flexibility in their target yield range for 10-year government bonds and revised upward their core consumer inflation forecast for the current fiscal year. In addition, the Bank made adjustments to its ultra-loose monetary policy: the marginal rate on long-term loans remains at 0.5%, but now it can rise to 1.0% depending on market conditions.

The yen tried to strengthen against the US dollar, and the USD/JPY pair fell to 138.70, but the instrument failed to hold on to these levels. As a result of keeping the cost of borrowing in the negative zone, investors began to sell the Japanese currency again, and the quotes of the USD/JPY pair rose to 142.15, and at the moment the buyers are trying to consolidate above this level. Some support for the instrument was provided by the publication of the June data on Industrial Production and Retail Sales in Japan. The volume of Industrial Production added 2.0% after -2.2% a month earlier, but fell short of the 2.4% increase expected by experts. In general, Japanese industry continues to be supported by an increase in domestic orders. In turn, Retail Sales accelerated from 5.8% to 5.9%, which indicates the stability of the country's economy in the context of the global economic crisis.

Support and resistance

The long-term trend is upward. Yesterday, the resistance level of 142.15 was reached, and today the buyers are trying to break through it and consolidate above it. If the attempt is successful, the next buy target will be 145.50. When the price returns under the resistance area 142.15–141.15, it will be possible to consider selling the instrument with the target in the support area 138.70–137.50.

The mid-term trend is downward. This week the USD/JPY pair corrected to the area of the trend's key resistance 142.93-142.40. If this resistance holds, sell positions can be entered with the first target at the low of July 14 and the second target in the target zone 2 area (134.75–134.27).

Resistance levels: 145.50, 148.75.

Support levels: 138.70, 137.50.

Trading tips

Long positions may be opened from the level of 141.15 with target at 145.50 and stop-loss at 139.20. Implementation time: 9-12 days.

Short positions may be opened from the level of 139.20 with target at 136.20 and stop loss at 140.60.