USD/JPY Reversing Higher After Testing 140 Lows
USD/JPY has been on a bearish trend since the middle of November and bears remain in control, selling every bounce. The reason for this decline has been the dovish reversal from the FED and the mention of rate cuts next year, with markets expecting them to ease interest rates by around 160 bps. Today this pair fell early in New York trading but tried to make a comeback, bouncing more than 100 pips higher so far.
USD/JPY H4 Chart – The 50 SMA Keeping the Trend Bearish
The Bank of Japan made some hawkish comments more than a month ago, but they have reversed course and are not planning any policy tightening soon, as the economy continues to show weakness, with Governor Ueda commenting during the Asian session on the next BOJ meeting. Earlier USD/JPY sellers had a go at the downside, testing the 140 lows, but the price rapidly recovered as US bond yields continue to show some resilience today. So, trading with a tight stop loss is also a risky game at this time, until probably by the middle of next week. Until then we will try to keep trading light as whipsaws are common in this period.
Bank of Japan Gov. Kazuo Ueda Comments on Japan Public Broadcaster NHK
- Ueda is in no hurry to unwind ultra-loose monetary policy
- Risk of inflation running well above 2% and accelerating was only small
- Desirable for wages to rise next year at around the same pace as this year “or somewhat faster”
- BOJ will be assessing to what extent firms pass on higher labour costs to services customers
- Not quite convinced yet that Japan can foresee inflation sustainably achieving the BOJ’s 2% target
- Chance of moving short-term interest rates out of negative territory next year “was not zero”
- Key factor would be whether wage hikes will broaden to smaller firms in 2024’s annual spring wage negotiations, but the BOJ could decide even before the smaller firms’ wage talk outcome becomes available, if their profits turn out to be very strong
Ueda is looking forward to the Bank’s regional branch managers’ meeting in the middle of next month, saying it would deliver “quite a lot of information”. On the prospect of a policy shift at the January 22 – 23 meeting:
- “For now, I don’t think the chance of this happening is large”
USD/JPY Live Chart
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