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USD/JPY Ahead of Bank of Japan Policy Decisions – By ASC


USD/JPY Chart and Price Analysis

  • USD/JPY drifted lower despite a strong US dollar.
  • Inflation and growth forecasts may be disappointing.
  • Retailers remained very short of net USD/JPY

The Bank of Japan’s monetary policy meeting this week will set out the central bank’s plan to tackle low inflation and weak inflation while at the same time maintaining control over the Japanese Yen, especially against the soaring US dollar. The central bank is expected to leave the current ultra -loose monetary policy situation unchanged, while at the same time supporting the Japanese Yen when it closes at 130 against the US dollar. While Japan continues to limit its 10 -year government yield at 0.25%, the benchmark U.S. 10 -year bond is offered with a yield of 2.83%. These spreads have widened over the past few months prompting low -yield currency sales to the U.S. dollar with higher returns as the Fed prepares to raise interest rates in the U.S. within a 50 basis point clip.

The US dollar also benefited from weakness in various global currencies with the US dollar group (DXY) hitting a new two -year high earlier today. The basket is a measure of value against a group of six foreign currencies including the Euro (57.6%weighted), the Japanese Yen (13.6%) and the British Pound (11.9%). All three of these currencies have been and remain weak, pushing the dollar even higher. The daily chart below shows the US dollar basket has been a one -way trade for several months.

US Dollar (DXY) Basket Daily Price Chart – April 26, 2022

USDJPY broke 125.00 recently, a level seen over the past few years as a line in the sand for the BoJ and the area where they will defend the Yen. The pair made the attempt at 130, the level last seen in April 2002, before turning slightly lower. Level 125 may now be support for the pair. The Bank of Japan needs to be clear with the market this week about the level of their preference for the Japanese Yen to help prevent further volatile movements.

USD/JPY Monthly Price Chart – April 26, 2022

USD/JPY Ahead of Bank of Japan Policy Decisions

Retailer data shows 24.81% of traders are net long with the ratio of short to long traders at 3.03 versus 1. The number of net-long traders was 9.81% lower than yesterday and 2.96% lower than last week, while the number of net-short traders was 5.03% higher than yesterday and 2.78% higher than last week.

We typically take the opposite view of public sentiment, and the fact of net short traders suggests the USD/JPY price may continue to rise. Traders are shorter than yesterday and last week, and the combination of current sentiment and recent changes gives us USD/JPY-increases the tendency of stronger contrarian trading.

What is your view yang If Japan – up or down ?? You can let us know via the form at the end of this section or you can contact the author via Twitter @nickcawley1.

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