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Japanese Yen Falls, USD/JPY Soars as Bank of Japan Commits to Defending JGB 10Y Target – By ASC


Japanese Yen, USD/JPY, Bank of Japan – Market Alerts

  • The Japanese yen weakened, the USD/JPY surged on the Bank of Japan’s policy announcement
  • The BoJ is committed to maintaining its 10 -year JGB revenue target as CPI estimates increase
  • Dovish hold left the Yen at the mercy of risk appetite, looking at US PCE data on Friday

The Japanese yen weakened after the Bank of Japan’s monetary policy announcement this month, fading by 1%. More attention than usual has been given to the BoJ due to a combination of rising inflationary pressures, rapidly falling currencies and market conditions that have driven government bond yields higher around the world.

Japanese Yen, USD/JPY Immediate Reaction to Bank of Japan

Charts Created Using TradingView

Take home the Bank of Japan, Where for USD/JPY?

So, what are the main points taken from the announcement? In short, the central bank doubled up maintaining its 10 -year bond yield target at 0.25%. The BoJ said that it will continue to buy it at the required amount, with no upper limit, each business day. This is despite the central bank raising its fiscal-2022 core inflation estimate to 1.9% from 1.1% previously.

This is a dovish holding scenario where despite rising price pressures, the central bank is sticking to its ultra -loss policy prescription for the economy. As estimated in my second quarter Japanese Yen base forecast, Japan’s headline CPI is likely to surpass the central bank’s 2% target towards the midpoint of this year. In fact, the model I provided is quite close predict recently Mac CPI printout.

So where does this leave the Japanese Yen? Both government officials and the central bank have made comments on the exchange rate. But, based on what is happening today, it seems that the latter is focused on supporting the economy. Thus, for the anti-risk currency to rise significantly, it may have to come from a further decline in global risk appetite.

This could come from the printout of important US economic data this week. On Friday, the Federal Reserve’s preferred inflation gauge will cross the wire. The PCE core deflator is expected at 5.3% y/y in March, down from 5.4% in February. The upside shock risks further strengthening the hawkish Fed, pushing Treasury yields higher, and possibly declining equities for the benefit of the JPY.

USD/JPY Technical Analysis

On the daily chart, traders will be watching if USD/JPY can maintain a break above April 20ke high at 129.40. Confirming refugees can open the door to further profits. In that case, the immediate resistance appears to be the 38.2% Fibonacci extension at 130.04.

Nevertheless, the negative RSI divergence indicates that the upside momentum is fading, which can sometimes precede the lower bend. In the event of a lower round, look for the uptrend line from March as well as the 20 -day Simple Moving Average. This can be supportive, maintaining an inverted focus.

USD/JPY Daily Chart

Japanese Yen Falls, USD/JPY Soars as Bank of Japan Commits to Defending JGB 10Y Target

Charts Created in TradingView

— Written by Daniel Dubrovsky, Strategist for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

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