Gold/JPY hovers below 50% Fibo ahead of BOJ

Gold in JPY terms trades well below JPY 140,675/Oz levels (50% of Jan 2015 high – Jan 2016 low) ahead of the Bank of Japan (BOJ) rate decision.

BOJ seen debasing currency

Markets expect BOJ to announce more stimulus and thus debase its currency. Gold is usually the biggest beneficiary of the currency debasement efforts by central bank or governments. Thus, an extreme BOJ action could strengthen gold in JPY terms. Moreover, the gains would be bigger than those seen in Gold/USD terms.

In case BOJ under delivers, we could see Yen strengthen. Nomura states, “No easing, which would surprise the market and us, could weaken investors’ confidence in the BOJ’s commitment to achieve its price goal and USD/JPY’s fall toward 102 is likely”. Thus, Gold in JPY terms could suffer a drop.

Gold/JPY Technical Levels

The immediate resistance is seen at 140,675 (50% of Jan 2015 high – Jan 2016 low), above which prices could target 141,774 (Jul 19 high). On the other hand, a breakdown of support at 138,622 (July 6 high) would expose 137,354 (38.2% of Jan 2015 high – Jan 2016 low).