Trade Analysis and Tips for Trading the Japanese Yen
The test of 157.75 in the first half of the day occurred when the MACD indicator had already moved significantly below the zero line, limiting the pair's downward potential.
The Fed's decision matters more for the yen than it might initially appear. Although the market puts the probability of a rate hike at this meeting below 10%, the outlook for subsequent meetings remains uncertain. Expectations of a rate hike in December are gradually being priced in, supporting US Treasury yields and, consequently, the dollar.
The yen has not forgotten the lessons of the previous Fed meeting. On September 15–16, the Fed raised its interest rate to a range of 3.75%–4.00%, with committee members voting unanimously in favor of the decision. The yen weakened in response. The market interpreted the rate hike as confirmation that the US central bank was prepared to continue fighting inflation, and Treasury yields moved higher. The Bank of Japan responded only two days later, raising its rate to 1.25% on September 18, but this was insufficient to reverse market sentiment.
For this reason, traders are paying particular attention to Kevin Warsh's remarks today. He will need to explain why the Fed is pausing after raising rates last month. A hawkish tone from Warsh would put further pressure on the yen. If the central bank emphasizes that inflation remains its primary focus and does not rule out further rate hikes, yields could rise, supporting USD/JPY and causing the already pressured yen to lose further ground. The Bank of Japan's cautious approach is also weighing on the currency. Its core consumer price index for September came in at 2.4%, compared with a forecast of 1.9%, while the market estimates the probability of a rate hike on October 30 at approximately 25%.
A dovish scenario would be the most favorable outcome for the yen. If Warsh indicates that the central bank has sufficient time to assess economic conditions, US Treasury yields could decline, the dollar could weaken, and USD/JPY could make a substantial move lower.
Regarding the intraday strategy, greater emphasis will be placed on implementing Scenarios No. 1 and No. 2.
Buy Signal
Scenario No. 1: USD/JPY can be bought today when the price reaches the entry level around 158.01 (the green line on the chart), with a target at 158.50 (the thicker green line on the chart). Around 158.50, the long position can be closed and a short position opened in the opposite direction, targeting a move of 30–35 points from that level. The pair could rise today, although the upward potential appears limited. Important! Before buying, make sure that the MACD indicator is above the zero line and has just started rising from it.
Scenario No. 2: USD/JPY can also be bought today if the price tests 157.78 twice consecutively while the MACD indicator is in the oversold zone. This would limit the pair's downward potential and trigger an upward market reversal. A rise toward the opposite levels of 158.01 and 158.50 can then be expected.
Sell Signal
Scenario No. 1: USD/JPY can be sold today after the price breaks below 157.78 (the red line on the chart), which could trigger a rapid decline in the pair. The key target for sellers is 157.27, where the short position can be closed and a long position opened immediately in the opposite direction, targeting a rebound of 20–25 points from that level. Selling pressure on the pair could return today if the central bank intervenes in the foreign exchange market. Important! Before selling, make sure that the MACD indicator is below the zero line and has just started falling from it.
Scenario No. 2: USD/JPY can also be sold today if the price tests 158.01 twice consecutively while the MACD indicator is in the overbought zone. This would limit the pair's upward potential and trigger a downward market reversal. A decline toward the levels of 157.78 and 157.27 can then be expected.
What the Chart Shows:
- Thin green line — the entry price at which the trading instrument can be bought.
- Thick green line — the projected price level for placing a Take Profit order or closing the position manually, as further gains above this level are considered unlikely.
- Thin red line — the entry price at which the trading instrument can be sold.
- Thick red line — the projected price level for placing a Take Profit order or closing the position manually, as further declines below this level are considered unlikely.
- MACD indicator. When entering the market, it is important to consider the overbought and oversold zones.
Important: Beginner Forex traders should exercise considerable caution when deciding whether to enter the market. Before the release of major fundamental reports, it is generally best to remain out of the market to avoid exposure to sharp exchange-rate fluctuations. If trading during news releases, always place stop-loss orders to minimize losses. Without stop-loss orders, the entire trading account can be depleted very quickly, especially when risk management rules are not followed and excessively large position sizes are used.
Remember that successful trading requires a clear trading plan, such as the example provided above. Making spontaneous trading decisions based on current market conditions is a fundamentally losing strategy for an intraday trader.
