The Bank of Japan will meet in the new day, and coming a month after the increase in the ceiling rate for the 10 year from 0.25% to 0.50%, the thought is that the dam has a crack, and it will be broken in 2023 as the BOJ starts to address the threat of inflation by tightening policy. The decision in the new day, is the next test to confirm that view.
On the policy date last month (December 20), the price of the USDJPY was near 137.40 at the time of the announcement. The price closed down at 131.68 down -3.80% on the day. Since then, the price has moved to a new low going back to May 30, 2022 at 127.215 yesterday. That added an additional -3.4% decline or -446 pips just from December 20.
Looking at the daily chart, the 50% midpoint of the bullish move up from the pandemic low from March 2020 is being approached at 126.56. That is the next key downside target. Below that, the low from May 2022 at 126.38 would be eyed.
Move below those levels, and the door opens for a move to the March 28, 2022 high at 125.106.
Those three targets would be the potential rewards reaped by the shorts looking for more downside momentum.
Conversely, what would the shorts NOT want to see technically? That is, what would ruin the bearish technical picture?
Looking at the hourly chart below, last week the pair made a run to the downside.
Right before the move down, the price moved above both the 200 (green line) and the 100 hour MAs (blue line). However, on Thursday, the price started selling in the early Asian session. The price then moved below the 200 hour MA, and after a retest of that 200 hour MA, restarted the selling with momentum. The price moved from the 200 hour MA at 131.89, to a closing level on that day at 129.29 or fall of 260 pips.
The last three days has seen lower levels but more up and down action too. That is not surprising heading into the key decision.
That consolidation, has allowed the 100 hour MA (blue line) to move down toward the price. The 100 hour MA comes in at 129.21. If the price moves above that, traders would eye the 38.2% of the move down from last week's high comes in at 129.37. Finally, the low from January 4 at 129.497 would be eyed.
If those three levels can be broken and remain broken, that would disrupt the bearish bias. Getting above would give the buyers some control in the short term, and disappoint the sellers.
Does it change the bias completely to the upside?
I don't think so.
There is still the 50% of the same move down near the nice round number of 130.038. Above that, and the 200 hour MA at 130.855 is another key target to get to and through.
However, moving above 129.497, would weaken the shorts hand, and give the dip buyers/USD bulls some ammunition to push higher.
