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USD/JPY tipping point for script reversal
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Hello everyone, today XM Forex will bring you "[XM Forex]: The critical point of the USD/JPY script reversal". Hope this helps you! The original content is as follows:
During the European session on Monday (October 20), the US dollar against the yen was trading around 150.50. It tried to rebound several times during the session, but failed to stand firmly above 151.00. The exchange rate is at the intersection of intensive key events and mutual pull of domestic and foreign policy expectations: the rearrangement of Japan's domestic political landscape and the superimposition of macro uncertainty in the United States have made the 150-151 area a watershed in the selection of the next trend.
Fundamentals
In Japan, the ruling Liberal Democratic Party and the Japan Reform Party confirmed their alliance, and the House of Representatives will vote on Tuesday for Takaichi Sanae to become the first female prime minister. The market's rising association of "fiscal increase and easing continuation" has strengthened the pricing of "the Bank of Japan may further postpone interest rate hikes". Takaichi Sanae continues Abenomics and favors the policy orientation of "big fiscal + loose money", which has rekindled the logic of carry trade in the short term. However, the new alliance is still in the minority, and the advancement of subsequent bills needs to be coordinated with other opposition forces. Systemic constraints limit the space for unilateral weakening of the yen.
At the macro data level, Japan's inflation has been at or above the 2% target for three consecutive years, and the economy achieved "five consecutive increases" in the second quarter. Shinichi Uchida, deputy governor of the Bank of Japan, reiterated last week that if the economy and prices advance along the expected path, interest rates will continue to be raised. This is a significant divergence from the market consensus of “two more interest rate cuts this year” in the United States. The "narrowing imagination" of interest rate spread expectations suppresses the momentum of the US dollar and puts constraints on the US dollar against the yen.
In the United States, the federal government shutdown has extended to its 20th day. The two parties are still in a stalemate over medical insurance subsidies. The Senate will vote on the temporary appropriation bill for the 11th time on Monday. Fiscal uncertainty coupled with concerns about growth momentum have made it difficult for the dollar to strengthen further after a slight rebound last week. At the same time, the FOMC went into silenceIn the short term, the US dollar is more driven by the "risk preference and news game"; the US CPI released this Friday is regarded as a directional catalyst, and the result will directly affect the interest rate cut path before the end of the year and the US bond yield curve, thereby affecting the central position of the US dollar against the yen.
Technical aspect:
From the daily chart, the Bollinger Band parameters (26,2) show: the upper Bollinger track is 153.432, the middle track is 149.399, and the lower track is 145.365; the recent high has been refreshed to 153.271, and the previous key peak was 150.914; the current price is above the middle track but is still far from the upper track. The caliber of the Bollinger Bands has slightly converged after the early expansion, indicating that the volatility is switching from the "explosion" to the "fallback transition" stage, and the price is consolidating at a high level above the mid-track.
In terms of MACD(26,12,9), DIFF is 0.840, DEA is 0.889, DIFF is slightly lower than DEA, and the histogram is -0.097, indicating that the kinetic energy is in a "retracement after high passivation", but it still remains above the zero axis. The trend has not turned bearish, but the upward kinetic energy has temporarily weakened. The RSI readings converged at 54.250, which is in the neutral to bullish range. There is no typical overbought signal, leaving the time window for bulls to try again.
As far as the price structure is concerned: the primary resistance above still depends on the effectiveness of the 151.00 integer mark, followed by the previous high backtest of 150.914 and the stage peak of 153.271, superimposed on the 153.432 Bollinger upper track to form a strong resistance band. If the bulls can break through 151 with heavy-volume positive lines and extend above 152, they are expected to hit the 153.271/153.432 range again. The lower support falls on the Bollinger middle track of 149.399 and the intensive trading area of 147-148. Further retracement will test the resonance zone formed by the previous low near 145.480 and the lower Bollinger track of 145.365. The technical key is: whether the mid-rail 149.399 is "immediately backtested". If it falls below and enlarges the negative line entity, the re-attack of the 153 area above will be significantly delayed.
Outlook
Short-term (1-2 weeks):
Scenario A - Mild inflation + suspension continues: If the CPI cooperates with the "dovish reconfirmation" of the interest rate cut path on Friday, the U.S. dollar yields will www.xmh100.come under pressure, and the U.S. dollar against the yen may retrace to test 149.399; if this level of support takes effect, it will still form a mean reversion pattern of "repeated fluctuations above the mid-track", and then try to break through above 151.
Scenario B - Inflation stickiness + fiscal uncertainty eased: If the CPI is higher than expected, the shutdown shows signs of easing, the U.S. term spread widens again, and the dollar's momentum is restored, the exchange rate is expected to hit the 152-153 range, but it still needs a "quantity breakthrough" and emotional resonance to stand above 153.271/153.432.
What the two scenarios have in www.xmh100.common is that 149.399 and 151.00 form a "box gate". Whoever is broken through by heavy volume first will dominate the short-term direction.
The above content is all about "[XM Foreign Exchange]: The critical point of USD/JPY script reversal". It is carefully www.xmh100.compiled and edited by the editor of XM Foreign Exchange. I hope it will be helpful to your trading! Thanks for the support!
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