How are you going to trade the BOJ decision?
We're just hours away from the BOJ announcement so it's time to hear what your plans are for trading it. Have you picked a trade already or will you be waiting for the details to emerge before making your play?
I'm probably going to sit this one out, as far as trading ahead of it. For me there's just too many possible parts to this decision, rates, QQE, types of maturities, types of purchases, changes of language etc etc. I see a mess of headlines coming and that's far too much risk for me. I like my central bank meetings nice and simple. If I feel that the risk is too great because of the amount of possible unknowns, I'm out.
After the event is a different story. We'll be able to judge whether any decision is good or bad. We can then try and fathom how good or bad, and what that potentially means for the currency going forward. We can then match those views to our charts and decide what levels may or may not come into play. We will have greater control after the event than before, or during, the initial minutes as it's released.
At the end of the day, our trading should always be guided by our gauge of risk. If you want big risk then go for it, it's your money. If you don't want risk then leave it alone and trade it when that risk is lower.
Remember also that this is just a monetary policy decision, so don't be thinking about 90 or 110 in USDJPY immediately after the release. At a guess, I'd say that probably 300 pips either way is the very most we're likely to get on any big news. There would have to be huge surprise news to bring anything more. If we are to see a big pull in one direction or another over the following days ahead, again the news will have to be something that changes the game, not just tinkers around the edges.
Lastly, because we also have the FOMC hours after the BOJ, be on guard that traders may not let the price get too far even if there is big news. There may be an element of traders who will be holding back on taking currencies off and away until the FOMC risk has been removed, and vice versa. One meeting could cancel out the other or they could both pull in the same direction, i.e double disappointment.
Whatever your trade, be safe, and stay in control.
All eyes on the Bank of Japan
