USD/JPY rebounds off major 100.00 support after central bank decisions

<p>Despite a drop for the US dollar on Wednesday and Thursday in the wake of the US Federal Reserve’s expected decision to keep interest rates […]</p>

Despite a drop for the US dollar on Wednesday and Thursday in the wake of the US Federal Reserve’s expected decision to keep interest rates on hold, USD/JPY bounced off a major psychological support level at 100.00 on Thursday as the yen made a modest retreat.

After the Bank of Japan announced on Wednesday a new set of measures to extend quantitative easing and expand its monetary base, the Japanese yen initially fell back, as might have been expected. Shortly after, however, the yen surged ahead of the September Fed meeting on Wednesday afternoon, pressuring USD/JPY down towards the key 100.00 level. After the Fed provided somewhat of a mixed message as it kept rates unchanged yet again, the US dollar fell further into Thursday, but the yen’s subsequent retreat helped prompt a clean bounce for USD/JPY right around the noted 100.00 psychological level.

As USD/JPY currently continues to be entrenched within a long-term, medium-term, as well as a short-term bearish trend, the 100.00 level remains a major “line-in-the-sand” for the currency pair. For this key line at 100.00 to continue holding, the yen will likely need to weaken further on the basis of the newly-announced Bank of Japan easing measures, and the US dollar will likely need to rebound on the somewhat greater likelihood of a Fed rate hike by the end of the year.

If these conditions occur, USD/JPY could continue its bounce off 100.00 support to target a further recovery towards the 103.00 and then 105.50 resistance targets. Any subsequent breakdown below 100.00 support, however, would be a strong bearish signal, in which case the next major downside target is around the key 97.00 support level.

USD/JPY Daily Chart

 

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.