USD/JPY Forex Technical Analysis – Tentative Trade Ahead of BOJ Meeting

The Dollar/Yen is trading nearly flat early Wednesday with investors reluctant to make big moves ahead of the start of a two-day Bank of Japan policy meeting, despite lowered estimates for aggressive tightening by the U.S. Federal Reserve.

At 08:14 GMT, the USD/JPY is at 138.104, down 0.094 or -0.07%. On Tuesday, the Invesco CurrencyShares Japanese Yen Trust ETF (FXY) settled at $67.72, down $0.06 or -0.09%.

BOJ Expected to Mull Lifting Inflation Outlook, but No Change to Loose Policy

Bank of Japan policymakers are expected to consider lifting its inflation forecast for fiscal 2022 from the current 1.9% to 2% or higher at its next monetary policy meeting, to be held for two days from Wednesday, reflecting higher oil prices and other factors, the Japan Times reported.

At the same time, the BOJ is expected to discuss lowering the fiscal 2022 economic growth forecast, currently at 2.9%, as corporate production activities are restrained by shortages of parts, due partly to COVID-19 lockdowns in China. Still, the central bank is seen maintaining its current massive monetary easing policy.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 139.389 will signal a resumption of the uptrend. A trade through 134.750 will change the main trend to down.

The minor trend is also up. A trade through 135.333 will change the minor trend to down and shift momentum to the downside. A trade through 138.395 will make 137.384 a new minor bottom.

The first minor range is 137.283 to 139.389. The USD/JPY is currently testing its pivot at 138.336.

The second minor range is 134.750 to 139.389. Its pivot at 137.070 is potential support.

The major support is the short-term retracement zone at 135.442 to 134.511.

Daily Swing Chart Technical Forecast

Trader reaction to the minor pivot at 138.336 is likely to determine the direction of the USD/JPY on Wednesday.

Bullish Scenario

A sustained move over 138.336 will indicate the presence of buyers. This could trigger an acceleration into the 24-year high at 139.389.

Bearish Scenario

A sustained move under 138.336 will signal the presence of sellers. If this move creates enough downside momentum then look for a possible break into the next pivot at 137.070.

The pivot at 137.070 is an important level because it is the last support before the short-term retracement zone at 135.442 to 134.511.