New lows for the USDJPY. How did the BOJ decision impact the technicals today?

Looking at the daily chart above, the pair moved sharply lower on the back of the BOJ shift in their 10 year target yield from 0.25% to 0.5%.That shift sent the USDJPY moving sharply to the downside and in the process away from its 200 day moving average at 135.724. The price also moved below the December 2 low at 133.61 and the 50% midpoint of the 2022 trading range 132.70. The price correction off of the initial low did reach back above the 50% retracement up to 132.89, but the move back to the downside has continued in the early New York session tilting the bias more to the downside once again (below the 50% midpoint level).

What next?

Going back in time, the area between 131.24 and 132.02 was home to swing highs and swing lows going back to April, May and June(see red numbered circles on the chart above). In early August of this year, the price fell below that old area, but found support buyers against its 100 day moving average (blue line in the chart). Support buyers leaned against that MA line and bounced the price higher. Buyers remained in control.

Later in August a correction lower, reestablished support in the old swing area (between 131.246 and 132.02). That was the go-ahead vlue to restart the bullish trend to the upside that ultimately stalled at the multi-decade high at 151.938 in the month of October.

Now with the price back to that old swing area, it should give traders some cause for pause (i.e., support). The dip buyers looking for a bounce could use the 131.246 level as a risk defining level with limited exposure. In other words, we should expect some sort of battle between the buyers and sellers within the area (with stops and more selling on a break below).

However, be aware that the technical breaks today, did damage and put the sellers firmly more in control.

Specifically,

• Breaking away from the 200 day moving average (green line) at 135.724 is more bearish long term.
• Falling below the old December low at 133.619 is more bearish long term.
• Falling below the 50% of the 2022 trading range at 132.70 is more bearish long term

All those levels should provide technical selling ceilings. For example if the 50% retracement at 132.70 is tested and cannot move back above, the sellers are firmly in control.

Ultimately it would take a move back above the 200 day moving average to hurt the bearish bias from a longer-term perspective.

So sellers are in control, but a key support area is being tested on the daily chart. Get below 131.25 area, however, and another door will open up from a technical perspective.

/inflation
Inflation

Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is measured by the level of the total money supply of a specific currency, for example the US dollar, which is constantly increasing. However, an increase in the money supply does not necessarily mean that there is inflation. What leads to inflation is a faster increase in the money supply in relation to the wealth produced (measured with GDP). As such, this generates pressure of demand on a supply that does not increase at the same rate. The consumer price index then increases, generating inflation.How Does Inflation Affect Forex?The level of inflation has a direct impact on the exchange rate between two currencies on several levels.This includes purchasing power parity, which attempts to compare different purchasing powers of each country according to the general price level. In doing so, this makes it possible to determine the country with the most expensive cost of living.The currency with the higher inflation rate consequently loses value and depreciates, while the currency with the lower inflation rate appreciates on the forex market.Interest rates are also impacted. Inflation rates that are too high push interest rates up, which has the effect of depreciating the currency on foreign exchange. Conversely, inflation that is too low (or deflation) pushes interest rates down, which has the effect of appreciating the currency on the forex market.

Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is measured by the level of the total money supply of a specific currency, for example the US dollar, which is constantly increasing. However, an increase in the money supply does not necessarily mean that there is inflation. What leads to inflation is a faster increase in the money supply in relation to the wealth produced (measured with GDP). As such, this generates pressure of demand on a supply that does not increase at the same rate. The consumer price index then increases, generating inflation.How Does Inflation Affect Forex?The level of inflation has a direct impact on the exchange rate between two currencies on several levels.This includes purchasing power parity, which attempts to compare different purchasing powers of each country according to the general price level. In doing so, this makes it possible to determine the country with the most expensive cost of living.The currency with the higher inflation rate consequently loses value and depreciates, while the currency with the lower inflation rate appreciates on the forex market.Interest rates are also impacted. Inflation rates that are too high push interest rates up, which has the effect of depreciating the currency on foreign exchange. Conversely, inflation that is too low (or deflation) pushes interest rates down, which has the effect of appreciating the currency on the forex market.
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