Sell the Fact Reaction again?

USDJPY,  H1 and Daily

Yesterday, the expected hike and news of the two dissenters out of BoE, along with a guidance signalling a glacial and cautious tightening bias, yielded a sell-on-the-fact reaction in forex markets, pushing Cable sharply lower, to a 1.3042 low from pre-announcement levels around 1.3220, and a buy-on-the-fact reaction in Gilt markets. The BoE in its statement stressed that “all members agree that any future increase in Bank Rate will be at a gradual pace and to a limited extent,” while also notably dropping its warning in the September MPC minutes that rates might rise faster than markets expect over the next few years.

Today, is likely to see a similar Buy the rumour sell the Fact scenario with USDJPY on the anticipation of major data out of US such as NFP, Unemployment Rates,  Services ISM, Trade, Factory orders, Fedspeak and Corp Earnings as well. All US dollar majors have hunkered down into the release of the U.S. October payrolls, which at 12:30 GMT and will fine-tune Fed policy expectations for the period ahead, including the December FOMC where there Fed is widely expected to resume its gradualist tightening policy with a 25bp hike in the funds rate.

With Japan closed for today, USDJPY has continued to consolidate near 114.00, below the four-session peak that was posted yesterday at 114.21. However, on European Open just now, the pair in a short timeframe such as hourly one the pair,  is moving on the upper Bollinger Pattern, breaking  the downtrend-line since November . Meanwhile also with Stochastic sloping on the upwards, a Long Position was triggered in the Short-term, since on the anticipation of NFP, the 114.50 is likely to be retested today.

The 114.50 level consider be a very strong Resistance level,  with USDJPY testing this  level 3 times since April and forming 3 peaks as seen in the Daily chart.

Hence Short hourly position was taken at 114.10,  with Targets at 114.25 and 114.45, slightly below resistance area. Support was set at 113.85-113.70. This position is against the 4H and Daily  trend, and it is on the anticipation of the data only. Depending on the data and market reaction we might see a possible Sell the fact reaction again.

Nevertheless, as already mention , the longer time frame such as the Daily chart, is in a Downtrend, since only a break above the 114.50 could suggest further bullish movement. Meanwhile a break below 112.50-113.00 could trigger the 3 peaks formation and suggests a possible Bearish Daily movement in the long-term.



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Andria Pichidi

Market Analyst


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