Trade Analysis and Trading Advice for the Japanese Yen

Due to low market volatility, the levels I identified were not tested, so I did not enter any trades.

The recent sharp rise in the yen has ended, but it has brought the carry trade back into focus. The question now is whether large-scale unwinding of this strategy could have a significant impact on the future direction of USD/JPY. The mechanics are straightforward: for years, investors have borrowed cheaply in yen at ultra-low Japanese interest rates and invested the funds in higher-yielding assets. As long as the yen was weakening, the strategy provided a double benefit, but currency appreciation turned it into a loss because the debt became more expensive to repay. Accelerated unwinding of these positions forces funds to sell assets and convert the proceeds into yen, which would provide even greater support for the Japanese currency. I would also note that the Bank of Japan will hold its meeting on September 18, swaps are fully pricing in a 25-basis-point rate hike, and a board member has already indicated that an unusually large move cannot be ruled out. If the central bank confirms a hawkish stance, the yen will continue to strengthen.

Today's US inflation report could also cause volatility in USD/JPY, although the situation here is somewhat different. I expect CPI to accelerate due to higher fuel and oil prices, while the core component should remain more subdued. The University of Michigan's consumer sentiment and inflation expectations data will also be released. Under normal circumstances, stronger inflation and increased expectations of a Fed rate hike would push the pair higher due to the difference in policy approaches between the Fed and the Bank of Japan. I believe that a high CPI reading could trigger a sharp but limited move higher in USD/JPY, which would run into the risk of renewed intervention by Japanese authorities. Weak inflation, on the other hand, would only increase pressure on the dollar and push the pair lower.

As for the intraday strategy, I will focus primarily on scenarios No. 1 and No. 2.

Buy Signal

Scenario No. 1: Today, I plan to buy USD/JPY when the entry price reaches around 154.25 (the green line on the chart), with a target of rising toward 155.06 (the thicker green line on the chart). Around 155.06, I will exit the long position and open a short position in the opposite direction, targeting a move of 30–35 points in the opposite direction from the level. The pair may rise today, but the upward potential is relatively limited. Important! Before buying, make sure that the MACD indicator is above the zero line and is just beginning to rise from it.

Scenario No. 2: I also plan to buy USD/JPY today if the price tests 153.90 twice consecutively while the MACD indicator is in the oversold zone. This will limit the pair's downward potential and lead to an upward reversal. A rise toward the opposite levels of 154.25 and 155.06 can be expected.

Sell Signal

Scenario No. 1: Today, I plan to sell USD/JPY after the 153.90 level is broken (the red line on the chart), which should lead to a rapid decline in the pair. The key target for sellers will be 153.10, where I will exit the short position and immediately open a long position in the opposite direction, targeting a move of 20–25 points in the opposite direction from the level. The pair will come under renewed pressure today if the central bank intervenes. Important! Before selling, make sure that the MACD indicator is below the zero line and is just beginning to decline from it.

Scenario No. 2: I also plan to sell USD/JPY today if the price tests 154.25 twice consecutively while the MACD indicator is in the overbought zone. This will limit the pair's upward potential and lead to a downward reversal. A decline toward the opposite levels of 153.90 and 153.10 can 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 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 projected price 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 take the overbought and oversold zones into account.

Important. Beginner Forex traders should be very cautious when making market-entry decisions. Before the release of important fundamental reports, it is best to stay out of the market to avoid being caught in sharp price fluctuations. If you decide to trade during a news release, always use stop orders to minimize losses. Without stop orders, you can lose your entire deposit very quickly, especially if you do not use proper money management and trade large volumes.

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