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by ForexNewsNow Team on November 5, 2010

Bank of Japan outlines futures plans, USD/JPY settles down

jpy usd yen dollar fx tradingNEW YORK (Forex News Now) – The Bank of Japan has stated it will buy Japanese REITS, or Real Estate Investment Trusts, with higher credit ratings of AA or above. This is the latest move for the BoJ to invest in the domestic economy in an effort to defeat deflation.

As the BoJ released the news, the U.S. dollar changed its FX rate against the Yen, as traders were undoubtedly keeping their eyes on the U.S. employment numbers that were set to come out during the morning in America.

Also noted in the BoJ’s statement, was the plan to purchase ETFs tracking the Nikkei and Topix indices, and the statement that rates would remain at almost zero.

Looking at the charts, you can see that most traders were waiting for the Non-Farm Payroll numbers, as the employment situation in the United States is one of the biggest drags on the FX rate for the Dollar.

The pair has been stuck in consolidation, and the BoJ seemed content to stay out of the currency market, sighting the FX rate of this pair has somewhat stabilized. The consolidation range, between the 81.50 and 80, is seen as both major resistance and major support.

Any break above the mentioned 81.50 area could see the pair run towards the 83 handle, and a break below would see the pair reaching for all-time lows, which is only about 50 pips below that mark.

While the Bank of Japan has been relatively quiet over the last few weeks, a break of all-time lows in the pair might tempt the Japanese to get involved in the currency markets again, hoping intervention will support higher FX rates in the future.

Although there is no real catalyst to push the Dollar up for the long-term, the pair is certainly oversold at these levels, and might be due for a bounce.

jpy usd forex trading analysis

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