The Yen Back Above the 50 SMA After Flushing Out Weak Stops
The uptrend continues in USD/JPY despite the deep dive yesterday
USD/JPY has been putting quite a bullish reversal in January, with USD buyers returning on expectations of fewer FED cuts. We have seen the occasional dip lower, such as the 200 pip tumble we saw yesterday. But buyers have kept coming back and the larger trend still remains bearish for this pair, despite comments from the Bank of Japan earlier this week.
On Tuesday this pair dived around 150 pips, to fall below 147 after Ueda’s comments following the BOJ decision to keep the monetary policy unchanged. Ueda implied that they might make a move in March or April, but they have to see the wage negotiations that take place at that time of the year in Japan. That seemed like a promise, which sent this pair lower at first, but markets have grown skeptical of such comments from Ueda, so the trade reversed pretty quickly above 148.50, where it seems to have formed a resistance zone.
However, this forex pair tumbled lower again yesterday, losing around 200 pips in the process. However, this move came from the USD side, which went through a considerable retreat as sentiment improved enormously after the People’s Bank of China reduced the RRR rate by 50 basis points, indicating that officials in Beijing have decided to release the stimulus at last.
No Stipend for Bank of Japan to Raise Rates
The economy of Japan seems sort of stable at the moment and the 1 Trillion Yuan that will be induced into the Chinese markets just by yesterday’s RRR cut, will also spill into Japan to some degree. What’s certain is that the economy of Japan is not booming and inflation is falling back to normal levels, so the Bank of Japan has no reason to raise interest rates.
Expectations for the Tokyo CPI (consumer price index) inflation are that it falls to 1.9% year-on-year, which is below the 2% target. On Tuesday even Governor Ueda confirmed that they will achieve the inflation target.
- The economy is moving in line with our forecast.
- We are confident in achieving our pricing target.
- This demonstrates that the economy is moving forward with its current pricing forecast.
- We remain committed to closely monitoring price movements.
- Cannot fully understand the impact of earthquakes in the Western Japan region just yet.
USD/JPY Live Chart
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