USD/JPY Monthly Technical Analysis for November 2014

The USD/JPY surged in October, aided by a spectacular rally on the last day of the month. On this day, the U.S. Federal Reserve ended its quantitative easing program while the Bank of Japan announced additional stimulus. This put the interest rate differential well in favor of the U.S. over Japan, triggering a surge by the U.S. Dollar against the Japanese Yen.

The Bank of Japan shocked the markets with a massive increase in its QE activities, signaling that it would continue liquidity injections into 2015. During this time period, the BoJ is expected to increase its balance sheet by 15 percent of GDP per year, and will extend the average duration of its bond purchases from 7 years to 10 years.

The surprise move by the BoJ has greenlit further upside action by the USD/JPY, giving the Forex pair a strong upside bias this month.

The multi-year range is 147.65 to 75.57. The retracement zone of its range at 111.61 to 120.115 is currently being tested with the market currently straddling the lower or 50% level at 111.61. This price may act like a pivot early in the session, but will likely become support once buyers overtake the 50% price. As prices rise, look for upside momentum to increase also making the upper or Fibonacci level at 120.115 a reasonable upside target.

On the downside, the early support is 111.61, followed by 105.43. Because of the strength created by the BoJ’s action, the market is not expected to spend much time under the support.

Look for a bullish tone all month as long as 111.61 holds as support.