JPY traders are gearing up for potential volatility. Next week, both the Federal Reserve (FED) and the Bank of Japan (BOJ) will hold meetings on Wednesday, alongside jobs data release from US. USDJPY has already experienced significant fluctuations in recent weeks. After testing 162, it dropped to 152 in just 10 working days. 

For the upcoming BOJ decision, markets and economists appear divided in their opinions. In the swap market, a rate hike is being priced in with a 73% probability. However, 36 out of 46 economists surveyed by Bloomberg do not anticipate a rate hike at next week’s meeting. This divergence could lead to substantial market movements following the meeting, with the direction of those moves depending on the BOJ’s decision. 

(USDJPY Daily Chart) 

USDJPY has been in a clear uptrend channel since early 2023. During this period, downward moves have occurred quickly, followed by smaller upward trends. There is a significant pattern within the intra-trend channel movements. When a shorter-term trend (within the trend channel) breaks, the downward moves tend to extend to between 38.2% and 50% of that trend, before the price picks up and moves toward the upper line of the main trend channel. This pattern has completed twice, and it may be starting again for the third time. 

(USDJPY Daily Chart – Zoomed In) 

Yesterday, USDJPY formed a bullish pin bar while testing the zone between 38.2% and 50% retracement in a single move. JPY bulls might be looking for an opportunity to realize some profits following the strong US GDP data and ahead of the BOJ meeting. Traders will be watching to see if this bullish candle will be enough to initiate the bullish pattern for the third time, or if the retreat will continue towards the lower line of the channel, which is currently at 148.18.