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The BOJ likely to offer the first rate surprise

Economic Events Brief, Jan 23 – Potential Trade Setups in the USD/JPY & USD/CAD

Posted Wednesday, January 23, 2019 by
Arslan Butt • 2 min read

The BOJ likely to offer the first rate surprise

Howdy, fellas.
Asian session began with a monetary policy decision from the Bank of Japan. As expected, the central bank kept monetary policy steady and cut its inflation projections. The BOJ also kept its short-term interest rate target at -0.1%, reinforcing the sentiment that it’s not in a rush to exit the ultraloose monetary policy.

In response, the Japanese Yen weakened as the dovish policy was made by 7-2 voting. Here, seven favored keeping rates steady and only two voted for a rate hike.

Watchlist – Top Economic Event

Canadian Dollar – CAD

Core Retail Sales m/m – The Statistics Canada is due to release Canadian core retail sales at 13:30 (GMT). The forecast isn’t in favor of the Loonie as Canadian economy seems to face a plunge in core retail sales to -0.4%.

Retail Sales m/m – Likewise, the retail sales are also expected to fall by -0.6%. This can be due to a massive drop in crude oil prices, yet a negative figure leaves its mark.

USD/CAD – Bearish Marobozu Breaking Hurting Bias

The USD/CAD has formed a bearish Marobozu pattern on the 4-hour chart, signaling a strong bearish bias for traders. The pair has completed 38.2% Fibonacci retracement and has also entered the overbought zone which adds to the bearish sentiment of traders.

Daily Technical Levels
Support Resistance
1.3277 1.3336
1.3239 1.3356
1.318 1.3415
Key Trading Level: 1.3297

USD/CAD – Trade Plan

I’m looking to open a sell position below $1.3340 with a stop loss above $1.3370 and take profit of $1.3295.

USD/JPY – Bullish Channel & Dovish BOJ

The BOJ left the monetary policy on hold, keeping the interest rate unchanged at -0.10% which is weakening the safe haven currency JPY. The technical outlook of the USD/JPY remains bullish as the pair has crossed above a 20 periods EMA resistance area of 109.640. The USD/JPY can face next resistance around 110.250.

Taking a look at the 4-hour timeframe, the pair is heading towards 61.8% Fibo levels at 110.300. The pair can take a bearish reversal below this level.