So, just as anticipated BoJ did go along with the marker sentiment-by close of yesterday most market participants were net long on the Yen-and the Yen rallied but not before clearing all stop losses on the up side. Well, that’s the markets for you and with the volatility expected; proper cushioning should come in tow. Now, BoJ decided to maintain its monetary base at 80 Trillion Yen by maintaining its government bond holding at its annual target and on top of that it made some radical changes-it increased its ETF purchases from the previous 3.3 to 6 Trillion Yen and increased its USD dollar lending program to $24B. Since BoJ holds most of the government’s bonds, it also created a lee way where BoJ could lend some of these bonds to financial institution and thereby allowing them to access the available USD. Many economists expected its commercial bank lending rates to be slashed further but since it is unpopular, it was maintained at -0.1%. By doing this, Kuroda bowed to political pressure and complemented Abe’s policy of further stimulus-remember sometimes this week he unveiled a further 28Trillion Yen to be used in “stoking inflation and growth expectation.” According to IMF, the Yen will continue to strengthen in the medium term with inflation expected to rise towards the 2% target by mid-2018 if this sort of stimulus continues, the bond market will suffer but the political ambitions of Abe and his Abenomics will continue to prosper.
So to the charts:
The market dropped by roughly 200 pips and that is not much considering all the hype before the announcement and according to the charts this is what should be expected. Price action is still moving downwards in a channel and it recently bounced off from the upper resistance trend line. With the news from Kuroda, today’s candle broke through the middle band and if anything, price action might move towards the support trend line at 71.00. Any break below that support zone in the 4 HR chart-which is likely-will spur a bear move towards our target as already, our indicators are still on a strong move down.
Our trading plan will be as follows, sell at all corrections in the 15 min charts:
Sell Limit: 74.00
TP: 71
SL: 74.50
Have a good trading day and a nice weekend.

NZDJPY 4HR Chart-29.07.2016

Source: Dalmas Ngetich

NZDJPY 15 Min Chart-29.07.2016

Source: Dalmas Ngetich

NZDJPY Daily chart-29.07.2016

Source: Dalmas Ngetich


  1. Maryna says:

    Hey Dalmas, is this not the same pair Daniel said we must buy LT at 74.00 and hold it? I know he has posted some updates, but do you think the LT trade is “off” for now? I never took the buy as I’m not a LT trader, but interesting to see how the trades play out and that LT trades are quite risky?

    1. Dalmas Ngetich - FOREX.TODAY says:

      Hey Maryna,
      I really think-and in my opinion-that the Yen continue to strengtening in the coming few weeks if not months. Fundamentally, despite the continuous stimulus the 2% inflation target is still elusive and there are serious considerations of making a serious overhaul on this stimulus strategy and adoption of new ways of jumpstarting the economy in other ways. Today, you saw that there is no helicopter money as many anticipated and the interest rate remained unchanged, rather there was expansion of USD lending and even relinquishing of government bonds by the BoJ to institutions who can manage them despite negative returns. Again, if you listened to Japan’s finance minister last week I think-he said further easing is proving impractical in improving the serious deflation and in fact easing is “illegal” if I may quote him. Then again, technically, price action didn’t bust through the resistance trend line both in the weekly and Daily chart-check my daily chart but rather it bounced off and still the middle BB in the weekly chart acted as a ceiling and a resistance zone where price action cannot go past. BoE comes on August 4th, RBA comes of August 1 and all are looking to cut rates even further, where do you think capital will flow to? I think, to Gold, Yen and German Bunds. So, I recommend we continue buying the Yen.

  2. Maryna says:

    Great feedback – much appreciated!

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