USD/JPY

Fundamental: Last week, the US Fed finally announced that the new round of quantitative easing would occur and put a downward pressure on the US Dollar. The USD will continue to face downward pressure for the next few weeks, as the US prints more and more money. However, Japan made its own announcement recently and they will counter the appreciating effect QE3 has on the Yen. Therefore, the USD/JPY pair had a brief free fall and has appreciated since then.

The main downward pressure on the Yen comes from political tensions between China and Japan. Traders sold the Yen aggressively on Monday as concerns grew about the conflict having any economic consequences. Most of the money that got out from the Yen went into the Euro.

The Bank of Japan may expand its monetary easing so traders might continue to take their money to the Euro or the US Dollar. This is being highly speculated among the trader community as the Bank of Japan is likely to follow in the footsteps of the Fed and ECB. The BoJ Governor Masaaki Shirakawa said that a high priced Yen was creating problems for Japanese exports, so traders can expect some measures soon.

Technical: The chart shows us that the pair has largely moved sideways since the past month. The QE3 speculation and announcement caused a decline from the 7^th of September, but the pair has largely risen from the 14^th. This is due to speculation of Bank of Japan’s monetary easing as well as political tensions with China.

However, the price is currently at a minor resistance level, and if it needs to appreciate it will have to break through this one as well as one more at 79. A rally is likely after these levels, until the price reaches at 80, where the resistance is significant. Given that the pair usually moves sideways, it is unlikely that the price would break through this level. On the other hand, if the pair is not able to break the resistance levels, it might fall and reach two significant support levels at 77.996 and 77.380, which would require a major event to break.

MACD is currently producing a bearish signal, but is in a broader bullish mode. It has been rising since 12^th of September and is at 0.153 right now. Stochastics are producing a bearish signal as well, but once it reaches the oversold mark, it should probably rise back again. Since the past week, it tends to remain in the overbought mark for long period of times, showing that the rallies are strong.