If yesterday was your idea of fun, you’ll probably love today. When USDJPY tested the red channel midline and SMA200 after the BoJ’s underwhelming NIRP action, we forecast the next move would be lower. And, it has been. Last night, it dropped back below the SMA100, too.
There are numerous fundamental reasons why this might be the case. But, since the USDJPY usually trades where the BoJ wants it to, the real reason is because they want to backtest the critical Fib at 120.11 (dashed, yellow line.) Any potential decline should be defended there. And, any further advance should be launched by one last backtest.
The key, for the bulls, is accomplishing the 1.57 decline without too much disruption to the equity markets. Yesterday, it meant an inexplicable rally after the initial sell-off in the opening hour. Will they permit the rest of the decline today?
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