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USD/JPY Forecast 20 May 2014

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USD/JPY Chart 20 May 2014
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The Japanese yen could continue rallying

The Japanese yen has been rallying in light volume since the start of the trading day as the main mood on the markets has been rather risk off. With the approaching of yesterday's lows we are cautiously betting that there is still further room to go for tonight's expiry in about 6 hours.

The Japanese yen has been trading in a rangebound fashion in the past 24 hours without marking new highs, nor lows. A rally from current levels to around 101.50-60 will be providing in our view a good opportunity to buy daily puts for tonight's and tomorrow's expiry.

There are only a few factors which could invalidate this scenario. The first is if we see some dovish FED talk tonight, which is unlikely in the eve of the monetary policy meeting minutes which will be released tomorrow evening. Janet Yellen will be speaking too, so both events couple spark some volatility in the US session.

Back to today - we haven't had any majorly important news in the market and this is the primary reason why we haven't seen a big move on the charts. That said, later tonight we will be getting data from Japan - it's trade balance figures. With little surprises expected, there is still more news which could disrupt this market.

Binary options traders for the USD/JPY should be watching for the Bank of Japan meeting early tomorrow morning as the governor of the Bank of Japan could talk down the Japanese currency and provide clues to the future direction of monetary policy. Expectations are that there will be no change, but surprises count.

As the pair has rallied yesterday from 101.10 to 101.60 we have seen some short covering, that however was not enough to drive prices even higher, as today we have regained the lower footing and are expecting further declines unless the Bank of Japan surprises tomorrow.

Any break above 101.70 on a sustained hourly basis would be invalidating this scenario and would be making us buy daily calls afterwards. For now prices are hovering close to yesterday's lows at 101.20 and we shall be looking closely to gather more information whether there are any news to impact the moves going forward.

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