The USD/JPY rally following the Bank of Japan's decision Tuesday might present a selling opportunity, with FX markets set to remain rangebound through the end of the northern summer.
IMM data and independent analysis suggest the market was long USD/JPY ahead of the decision nL1N1UR00Z on the assumption the Kuroda-led BOJ policy board would refrain from making changes to their policy that could be interpreted as tapering or normalizing.
The strategy was rewarded by the one percent rally in USD/JPY from yesterday's low, but the lack of surprise from the BOJ's policy tweaks nL4N1UQ6L9 should diminish the impact of their decision in the coming days/weeks.
Ongoing trade tensions and the wobble in U.S. FAANG stocks will likely limit risk rallies in the weeks ahead and periods of uncertainty should keep the JPY attractive in the short term at least.
Selling USD/JPY rallies ahead of the 61.8 Fibo of the July decline at 112.18, with a tight stop, might be the preferred strategy in the near term.
Longer-term players might look to sell extended rallies while the 200-week moving average (currently at 113.29) holds.
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