It’s almost D-day, or in this case Bank of Japan day, as market expectations are building in the wake of the upcoming announcement from the BoJ about how it’s going to follow up the fiscal stimulus provided by Abenomics. Additionally, we will have CPI statistics out as well which are generally in line with expectations and the deflation will obviously weigh heavily on the central bank who’s efforts to stimulate the economy and boost inflation have so far struggled to beat the saving culture in Japan. So what can we expect? So far we have seen aggressive bond buying in the open market, especially government debt and a push into the equity markets, so this leaves the door wide open for something truly radical and aggressive.  Put plain and simple, the next step has to be a big one! Otherwise markets will turn the other cheek and we won’t see the movements that the BoJ would like to see in the economy and on the currency markets.

So trading wise the USDJPY long position is looking like something that the market is waiting on and the bounce of the 20 day moving average today was no coincidence as the MoF/BoJ statement came out. For many the bulls will be building to take a piece out of the action and many are expecting a strong rally for the USDJPY. Previous heavy announcements sent the USDJPY climbing through technical levels like a hot knife through butter, so it’s hard to say where it could stop in the event of a strong showing from the BoJ. The two major resistance levels can be found at 107.491 and 111.843 and these are likely to be breathing areas for the market in the case of a strong breakout higher. Either way the market is certainly poised for a big movement and the USDJPY is what I am focused on at present and have been talking up for the last week.

The S&P 500 has been so far getting weaker and weaker when it comes to the technical’s on the charts, the H1 is a classic example of the bulls running out of steam so far. With the ceiling currently holding at 2168.50 it seems unlikely that unless we see bad news the market will rally higher on the basis that the FED will react dovish. For now though the ranging pattern shows no signs of letting up so traders will be looking to bounce of the ceiling and play of H1 support at 2155.40. When we see a close below this level it will spur the bears into action and we could see a run much lower, especially if we have a hawkish FED talking up the possibilities of further rate rises in the future; if the global economy remains stable.