Analysis of Trades and Trading Tips for the Japanese Yen

The test of the 158.02 price level in the first half of the day occurred when the MACD indicator had just started moving upward from the zero line. This confirmed the validity of the entry point for buying the yen. As a result, the pair rose to the target level of 158.27.

The second half of the day will be driven by US policy developments for the yen, but first, it is worth reviewing today's Japanese economic data. The Services Business Activity Index for October came in at 51.7, compared with the forecast of 52.0, while the composite PMI stood at 52.1, against expectations of 52.3. Both indicators were slightly below forecasts but remained above 50, meaning that the Japanese economy continues to expand, although without accelerating. The yield on 10-year bonds at today's auction was 2.77%, compared with 3.10% at the previous auction, indicating that the bond market has cooled along with expectations surrounding interest rates. The key question for the yen is how far the Bank of Japan is prepared to go. The interest rate currently stands at 1.25% following the September increase. On October 30, the central bank paused its tightening cycle in an 8-1 vote, with the only dissenting vote cast by Hajime Takata, who called for an immediate rate hike. The Bank also stated for the first time that underlying inflation had reached 2%. Many economists now expect a rate hike in December, while the baseline scenario envisages three 25-basis-point increases in December, March, and July, bringing the cycle to an end at 2%.

The external backdrop, however, depends on the United States. Weekly initial jobless claims data will be released today and are likely to confirm the resilience of the labor market. However, speeches by FOMC members Beth Hammack and Thomas Barkin will be the main focus. Only hawkish remarks from policymakers are likely to support the dollar, which has weakened since the election. If their comments are hawkish, demand for the US currency will recover, providing support for USD/JPY, while a cautious tone would give the yen an opportunity to hold its ground. Under these circumstances, expectations of a December rate hike by the Bank of Japan are likely to continue supporting the yen, although the day's direction will depend on the Fed's tone.

As for the intraday strategy, the focus will be primarily on the implementation of Scenarios No. 1 and No. 2.

Buy Signal

Scenario No. 1: Buy USD/JPY today when the price reaches the entry point around 158.41 (the green line on the chart), targeting a rise to 158.62 (the thicker green line on the chart). Around 158.62, close long positions and open short positions in the opposite direction (targeting a move of 30–35 points in the opposite direction from this level). The pair can be expected to rise today only if US economic data are strong. Important! Before buying, make sure that the MACD indicator is above the zero line and has just started rising from it.

Scenario No. 2: Buy USD/JPY today if the price tests the 158.22 level twice consecutively while the MACD indicator is in the oversold zone. This will limit the pair's downward potential and trigger a reversal to the upside. A rise toward the opposite levels of 158.41 and 158.62 can then be expected.

Sell Signal

Scenario No. 1: Sell USD/JPY today after the price moves below the 158.22 level (the red line on the chart), which would lead to a rapid decline in the pair. The sellers' key target will be 157.94. At this level, close short positions and immediately open long positions in the opposite direction (targeting a move of 20–25 points in the opposite direction from this level). Pressure on the pair is likely to return today if the central bank intervenes. Important! Before selling, make sure that the MACD indicator is below the zero line and has just started declining from it.

Scenario No. 2: Sell USD/JPY today if the price tests the 158.41 level twice consecutively while the MACD indicator is in the overbought zone. This will limit the pair's upward potential and trigger a reversal to the downside. A decline toward the opposite levels of 158.22 and 157.94 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 estimated price level at which Take Profit orders can be placed or profits can be closed manually, as further growth above this level is unlikely;
• Thin red line – the entry price at which the trading instrument can be sold;
• Thick red line – the estimated price level at which Take Profit orders can be placed or profits can be closed manually, as further decline below this level is unlikely;
• MACD indicator. When entering the market, it is important to consider the overbought and oversold zones.

Important. Beginner Forex traders should make market entry decisions with great caution. It is best to stay out of the market ahead of the release of important fundamental reports 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 deposit can be lost very quickly, especially when large trading volumes are used without proper money management.

Remember that successful trading requires a clear trading plan, such as the one presented above. Making spontaneous trading decisions based on current market conditions is inherently a losing strategy for an intraday trader.