Trade Analysis and Tips for Trading the Japanese Yen

The test of the price at 158.62 coincided with a moment when the MACD indicator was just starting to move down from the zero mark, confirming the correct entry point for selling the dollar. As a result, the pair dropped by 40 pips.

Today, the Bank of Japan maintained the key interest rate and published higher inflation forecasts, which leaves room for a possible rate increase earlier than the expected summer timeframe. This decision had no impact on the currency market, as many are now focused on the press conference for further details.

In the statement accompanying the decision to keep the rate unchanged, Bank of Japan representatives emphasized their growing confidence in the sustainability of inflation, driven by both external factors and domestic demand. The new economic forecasts published alongside the decision indicate that inflation is expected to remain above the target of 2%. These circumstances certainly put pressure on the Bank of Japan to consider further monetary policy tightening. However, traders are in no hurry to revise their expectations regarding the timeline for the next rate hike. Most likely, the central bank will act cautiously, especially considering the political upheavals anticipated in the near future.

I would like to remind you that at the beginning of this month, the Japanese currency reached a new 18-month low following reports that Prime Minister Takaichi would call for elections. A victory that strengthens her party's coalition majority in Parliament could give her more opportunities to implement expansionary fiscal policies, which is currently putting pressure on the yen.

As for the intraday strategy, I will rely more on implementing Scenarios #1 and #2.

Buy Scenarios

Scenario #1: I plan to buy USD/JPY today when it reaches the entry point around 158.68 (green line on the chart), with a target for growth to 158.96 (thicker green line on the chart). At the point of 158.96, I intend to exit the market and open short positions in the opposite direction (aiming for a movement of 30-35 pips in the opposite direction from the level). It is best to return to buying the pair on corrections and significant pullbacks in USD/JPY. Important! Before buying, ensure the MACD indicator is above the zero line and just starting to rise.

Scenario #2: I also plan to buy USD/JPY today if the price tests 158.53 twice and the MACD indicator is in the oversold area. This will limit the pair's downward potential and lead to a market reversal upwards. An increase can be expected towards the opposing levels of 158.68 and 158.96.

Sell Scenarios

Scenario #1: I plan to sell USD/JPY today only after the 158.53 level is updated (red line on the chart), which will trigger a rapid decline in the pair. The key target for sellers will be the level of 158.28, where I intend to exit the market and immediately buy in the opposite direction (aiming for a movement of 20-25 pips in the opposite direction from the level). It is best to sell as high as possible. Important! Before selling, ensure the MACD indicator is below the zero line and just starting its decline.

Scenario #2: I also plan to sell USD/JPY today if the price tests 158.68 twice and the MACD indicator is in the overbought area. This will limit the pair's upward potential and lead to a market reversal downwards. A decline is expected at the opposing levels of 158.53 and 158.28.

What is on the chart

• Thin green line — entry price at which you can buy the instrument
• Thick green line — suggested Take Profit price or level at which to manually lock in profit, since further rise above this level is unlikely.
• Thin red line — entry price at which you can sell the instrument
• Thick red line — suggested Take Profit price or level at which to manually lock in profit, since further decline below this level is unlikely.
• MACD indicator — when entering the market, it is important to follow the overbought and oversold zones
• Important notes: Beginner forex traders must be very cautious when deciding to enter the market. It is best to be out of the market before major fundamental reports are released to avoid being caught in sharp price swings. If you decide to trade during news releases, always place stop orders to minimize losses. Without stop orders, you can lose your entire deposit quickly, especially if you do not use money management and trade large volumes.
• Remember that successful trading requires a clear trading plan like the one presented above. Spontaneous trading decisions based on current market noise are a losing strategy for the intraday trader.