UPDATED USDJPY TRADE 1ST NOV

Read below for the original trade idea!!!!!!!!

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The USDJPY has been stuck in a direction-searching movement for a good few weeks, and has long since come off the high established since late May 2013, as the steam provided by the actions of the BOJ, namely the stimulus in the form of bond buying has since lessened considerably. However, from May onwards until now the consequences of this action are still evident in the movements of this pair, especially whenever Japanese data points are released that indicate weakness in Japan's economy or whenever the BOJ's governor, Kuroda comes out to emphasise to the world that the institution is going to continue its large scale easing until its objectives are met.

However, the weakness in the USDJPY of late has largely been determined by the drama unfolding in the US and the focus on whether the FED will TAPER or NOT TAPER, and hence, the flight to safety came in often, and the short USDJPY risk off trade has been a source of profits for many in the market. Still, we can see from the charts that the strong uptrend previously created is still largely intact.

In recent developments, we can see that the USDJPY has since found a support level after systematically moving within a huge trend channel.

So how will I trade this pair? Let's take a look on a shorter term timeframe

As the UJ has convincingly broken out of this downtrend, I am of the view that it will continue upwards to the target I have identified above. Barring any changes in the fundamental factors, I will continue looking for good entry points to buy until that level. As Japan has stronly reiterated its stance on its monetary policy and objectives, I am comfortable being bullish on the USDJPY even if the FED does not taper its QE until early next year, and will be looking to go long even if the USDJPY falls to lower levels.

I have already started going long as I had taken a chance on the breakout happening based on observations of technical and fundamental factors.

* This article is a courtesy of www.traderence.com, under Traderence Holding Pte Ltd

Is NFP strong enough to provide direction for pairs?

As the trading day progressed today, we could witness largely indecision in the markets with regards to the USD and the general sentiment towards the health of the global economy on Monday.

Throughout the day, limited movements were experienced in most of the pairs, as it became more and more evident that the market was waiting to see where the US economy will be headed. Although the US government shutdown has since been ended, it is estimated that as much as hundreds of millions of dollars a day was lost with each day the government was shutdown.

This has put traders on the defensive in buying into the USD as the market may see this as a factor that could delay the tapering by the Federal Reserve(US Central Bank) of its monthly QE activities to the tune of 85 billion USD until it can see better data coming out in support of the economic recovery it is pushing so hard for. The market was expecting an October tapering, or perhaps even November, but the government shutdown has since changed the views of many, who think that it has hurt the economy and hence delayed the recovery.

With the exception of the USDJPY & GBPUSD, most of the major pairs showed little directional bias, although the EURUSD & USDCHF did provide some movement but still ended up largely unchanged.

The directional movement of the USDJPY was largely due to JPY weakness as it showed a worse than expected "Trade Balance" number and from statements made by the BOJ governor Kuroda who reiterated that the bank would stick to its stimulus program. (Source : http://www.investing.com/news/forex-news/dollar-moves-higher-vs.-yen,-u.s.-data-in-focus-254091). Even then, the price action shows signs of a shallow movement indicating caution by traders.

This would support my view that the NFP reading coming out from the US which was delayed due to the shutdown of government services, and originally scheduled to come out October 4th, and has now been rescheduled again to 22 October, is in the focus. Depending on how much it will deviate from the forecast, this could be the catalyst that could tip the currencies in either direction and provide some volatility in the markets. Coupled with some data coming out from China in the morning, I am certain Tuesday will be a much more eventful trading day and I will be ready to take advantage of the movements!

GBPUSD reversal coming in?

So, it seems that the minor downtrend being formed in the GBPUSD has been solidified and established? However, is this just a pullback before going even higher or is a reversal actually coming in? Let's take a look;

Much will depend on the stance of the BOE and its governor Mark Carney, and what the decision will be in terms of its monetary policy, ie whether the BOE is going to reduce, maintain, or increase interest rates and what their justification behind its move will be.

In fact, it was because Mr Carney did not increase interest rates which disappointed the GBP bulls, and prompted the strong upward movement to start easing off.

The fact that the US government is taking the first steps to bridge their disagreements between the Republicans and Democrats in terms of the debt ceiling and government spending is giving USD bulls some reason to celebrate and we can see it being reflected in most of the major pairs, ie USDJPY, EURUSD, and of course the GBPUSD. (Read : http://www.investing.com/news/forex-news/dollar-firms-up-on-u.s.-debt-ceiling-deal-hopes-253718)

Of course, the announcement by Barack Obama on the next person he is tapping to be the Federal Reserve chairperson has eased alot of uncertainty and also yesterday evening's FOMC meeting minutes have given the market the impression of tapering "ALMOST" being on the table.

Well, if you are also looking at the 7pm "Asset purchase facility" and "Rate Statement" reading, you might also want to take a minute to look at what Mark Carney and his team are thinking or looking at. (http://www.bloomberg.com/news/2013-10-09/carney-eyes-recovery-momentum-as-boe-seen-showing-united-front.html) 

I would personally read it as saying that the BOE is actually very cautious on its economic growth at the moment and that they will not increase interest rates with more allowance for further easing measures. This will be supported by the fact that recent data coming out of the UK is still shaky. (Industrial output & facorty production readings from yesterday)

I managed to get some profit from selling the GBP when it broke down of the second level of support, but maintaining caution as the market still seems uncertain on outcome from the US. However, for now, to follow the trend would be to continue selling.