Yen longs were finally rewarded last week as the currency gained by 2% against the dollar. The BOJ finally got the ball rolling and things are definitely heating up ahead of the policy decision next week. USD/JPY fell to as low as 146.53 earlier but is now trading back up to around 146.95 on the day. Let's take a look at what the chart is saying.
The drop earlier came amid more hawkish BOJ murmurs from the weekend. The Japanese central bank is reportedly considering to scrap its yield curve control program here. Alongside talks of exiting negative rates last week, yen bulls are certainly able to let their imaginations run wild for a bit - at least for the time being.
Going back to USD/JPY, the chart shows that sellers are running into a minor floor currently. The 38.2 Fib retracement level at 146.82 is in play on the daily chart. However, as mentioned last week, I'd still wager that the 200-day moving average (blue line) - now seen at 146.19 - will be a bigger play to watch out for.
The key thing to pay attention to for the yen this week will be the spring wage negotiations.
The talks should conclude on 13 March and we can expect reports on the results to surface any time after that. In the context of trading this week, we will have until 15 March at least. But for the BOJ, they only meet on 18 March and will announce their policy decision on 19 March.
It is a tight window but considering how much they have guided markets in the last few weeks and also the work that the government has put in to push corporations for stronger wage hikes since last year, it has made the task at hand a whole lot easier for policymakers.
The question now is, can they walk the walk after talking the talk?
