USDJPY selloff down to $150.00

This week is all about the Federal Reserve (Fed). The central bank is widely anticipated to cut interest rates by a quarter point, and what its Chair Jerome Powell says afterward will be the biggest driver for currencies worldwide.

Investors will also be watching key US economic data—inflation (CPI/PPI), nonfarm payrolls (NFP), and business activity (PMI/ISM) numbers. These reports will tell us if the market is right to expect the regulator to continue a monetary easing cycle or not.

With a December borrowing cost reduction almost fully priced in, the greenback is now being put on the defensive. Any hint from Powell that more cuts are coming will likely push it even lower.

The twist in the story is the Bank of Japan (BoJ). Counterbalancing the Fed's dovish tilt, markets are wondering if the BoJ might finally hike rates, or at least sound way more hawkish at its next meeting.

Governor Kazuo Ueda has been laying the groundwork by making several key comments:

The BoJ is about to weigh all the "pros and cons" of a rate hike and make decisions as appropriate.

The likelihood of its baseline scenario for inflation being realized is "gradually increasing."

Officials will raise rates if consumer prices and the economy move as expected.

Ueda warned that adjusting the policy too slowly could let inflation rise to US and European levels, thus causing market turmoil. 

In addition, he tried to soften the blow, comparing a hike to "loosening the accelerator" rather than "slamming on the brakes" in order to support steady GDP growth and keep prices under the sway.

With the Fed easing and the BoJ potentially tightening, this policy divergence is putting consistent pressure on USDJPY to move lower.

The ultimate recommendation is to sell the USDJPY pair from resistance at 157.00. Lock in profits at 150.00. Place Stop Loss at 159.00.

Calculate your open position so that a potential loss (protected by a Stop Loss order) is limited to 1% of your deposit. If your account balance does not allow entering a position of this size, it is better to skip the trade and wait for other market signals that meet low-risk criteria.