Wednesday, April 27, 2016

USD/JPY Forex Trading Strategies May 2016 - USD JPY Forecast

USDJPY Forex Trading Strategies May 2016 - Mr. USD and Ms. Japanese Yen Dancing on the Forex Dance FloorUSDJPY Forex Trading Strategies May 2016 - Mr. USD and Ms. Japanese Yen Dancing on the Forex Dance Floor

Konnichiwa! As we head to the end of April, we could expect a currency war between Japanese Yen and US dollar. The Federal Reserve and Bank of Japan meet to decide monetary policy in the coming days. This could set the tone for our USDJPY Forex Trading Strategies May 2016. If you have checked your financial health[1] and are looking to take advantage of the upcoming market movements, read on baby!

1- Japan Economy

Let's first look at the Japanese economic situation. Here is what could impact USDJPY forex trading strategies May 2016:

  • Ms. Yen is the strongest currency in 2016:  Japan's economic recovery plan highly depends on a weak Yen. However Ms. Yen has become the best-performing G10 currency in 2016 (you go girl!!). She is more than 10 percent up against Mr. US dollar.
  • Japan doesn't like a strong Yen (for the most part): Her strength threatens to serve as an arrow to the heart of Japan's Abenomics. That is because it has been smashing exports and dampening inflation[2] at a time when the country is trying to boost both.
  • Japan is playing the blaming game: Last week, Bank of Japan (BoJ) governor Kuroda blamed the Fed's less hawkish stance this year as one of the reasons why the Ms. Japanese Yen is getting stronger.  This has lead analysts to speculate that the BoJ meeting on Thursday will be reactionary and dependent on the Fed's tone on Wednesday.
  • Further action from the BoJ to reinforce a weak Yen is widely expected at some point: Japan's government kept its assessment of the economy unchanged this month but said it was still analyzing the impact of earthquakes over the weekend that damaged homes and halted production in the southern manufacturing hub of Kumamoto. Some economists say Japan is likely to quickly shake off the impact of the earthquakes, but there is lingering speculation that Prime Minister Shinzo Abe could call off a sales tax hike scheduled for next year to focus on bolstering domestic demand.
  • Japan is desperate to boost its consumer spending and accelerate GDP[3] growth: Japan's government might issue spending vouchers and promote national discount-sales events similar to Black Friday in the United States to boost its lackluster consumer spending and accelerate gross domestic product growth.They could decide the details as soon as next month as it finalizes the policies for its annual growth strategy, which could potentially help the BoJ in its struggle to accelerate inflation.Authorities will also take steps to increase inbound tourism, raise the national minimum wage and encourage more IT investment, according to a draft approved on Monday by the government's top advisory panel.

Keep an eye on...

  • BOJ Monetary Policy Statement on Thursday April 28th
  • Japan's Consumer Confidence Index on Monday May 9
  • Japan GDP May on Monday May 16th
  • Japan Imports and Exports data on Sunday May 22

Japan will go on a week-long holiday beginning of May, Golden Week.  During that period Ms. Japanese Yen may also decide to take a vacation and get all lazy on the forex dance floor.

2- US Economy

We are not expecting Wednesday's Fed meeting to result in any policy changes. However Invest Divas and Divoas will still be looking for hints as to whether the rate rise expected at June's meeting will go ahead. Futures markets currently put the probability of this at about 20 per cent.

As recently as December, the Fed was expecting to hike interest rates three or four times in 2016. As of the last meeting, FOMC projections indicated many members believed only one more hike would be justified in 2016.

US gross domestic product is also thought to have weakened during the first quarter. A slowdown in consumer expenditure is likely to push the seasonally adjusted annual rate down to 0.7 per cent, from the 1.4 per cent seen during the final quarter of last year.

Keep an eye on...

  • FOMC Statement on Wednesday April 27 at 6 PM GMT
  • US Non-Farm Payrolls on May 6th
  • FOMC Minutes on May 18th
  • US Weekly Unemployment Claims

3- USD/JPY Technical Analysis

Now that we've crushed the fundamentals, let's see what the technical[4] point of the Invest Diva Diamond[5]  suggests for USDJPY Forex Trading Strategies May 2016:

Big Picture Monthly Chart: While the pair remains above the ichimoku cloud[6], it seems to have aborted completing a Saucer Bottom pattern[7] at its neckline at 123. It is testing the long-term 38%  Fibonacci[8] retracement level at 110. Our new support is as low as 100.

Daily Chart Market Sentiment: The pair remains below the ichimoku cloud[9]. After the spike on Friday, the pair erased most of the advances on the forex dance floor and remained in the pivot zone between 110 and 113.30.

4- USDJPY Forex Trading Strategies May 2016

As a savvy Invest Diva student[10] you should already be able to put the two and two together and come up with your own USDJPY Forex Trading Strategies May 2016. But for our newbies and first time visitors, let me elaborate.

If we don't see a change in stance on either the Fed or BoJ, we could expect the pair to keep its bearish sentiment. Japan really hopes for JPY to weaken and for the USD/JPY pair to dance upward.

[11]

Bearish triggers: 

  • No hints of rate hike from Fed and/or no stimulus from BoJ on the Fundamental side.
  • A confirmation of break below 110 beginning of May on the technical side
  • Worse than expected US economic data on May

Bullish[12] triggers: 

  • Japan Economic stimulus, rate cut or QE
  • Hawkish Fed and amazing US economic data
  • Failure to break below 110
  • A miraculous break above Ichimoku cloud on daily chart

Summary: So far there are a number of factors that points a bearish scenario for USDJPY forex trading strategies May 2016. However this weeks fundamentals could change history if the politicians are up for it. To learn how to manage your portfolio based on the outcome, or to learn about other currency pairs, stocks and ETFs, book your  investment coaching session[13] with me this week!

Here are the important USD/JPY levels to keep an eye on:

Support Levels Turning Point Resistance Levels
107 110 116
100 113.30 123

This article was originally published at InvestDiva.com[14].

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



References

  1. ^ checked your financial health (investdiva.com)
  2. ^ inflation (investdiva.com)
  3. ^ GDP (investdiva.com)
  4. ^ technical (investdiva.com)
  5. ^ Invest Diva Diamond (investdiva.com)
  6. ^ ichimoku cloud (investdiva.com)
  7. ^ Saucer Bottom pattern (inves tdiva.com)
  8. ^ Fibonacci (investdiva.com)
  9. ^ ichimoku cloud (investdiva.com)
  10. ^ Invest Diva student (investdiva.com)
  11. ^ (kiana3.typeform.com)
  12. ^ Bullish (investdiva.com)
  13. ^ investment coaching session (investdiva.com)
  14. ^ This article was originally published at InvestDiva.com (investdiva.com)


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