USD/JPY Rises As Bank Of Japan Holds

The Bank of Japan votes for no change by a majority of 7-2. USD/JPY rises 40 points. The BoJ has held fast as expected. (see below)

*(JP) BOJ Leaves Interest Rate On Excess Reserves (IOER) Unchanged At -0.10%; As Expected Votes 7-2 To Keep Policy Unchanged

Keeps 10-Year JGB yield target at ~0%

Will keep expanding monetary base until inflation exceeds 2% .

The main take-outs were as follows,

* BOJ Raises Economic Assessment< * Boj: Japan'S Economy Continues To Recover Moderately As A Trend< * BOJ Maintains Pledge To Buy Jgbs At Current Pace So Balance Of Its Holdings Increases At Annual Pace Of 80 Trln Yen< * Boj: Revises Up View On Exports, Output< * BOJ: Exports, Output Picking Up< * BOJ: Japan Economy Likely To Turn To Moderate Expansion< * BOJ: Risks To Outlook Include Developments In Us Economy, Impact Of Us Monetary Policy On Global Markets

Unsurprisingly they have upgraded the outlook for exports given that USD/JPY is 10% higher (ie JPY weaker) since Mr Trump’s elections victory. Even more unsurprisingly, they say that “developments” (read the new President) in the US economy and higher US rates create uncertainties in their outlook. No argument there!

USD/JPY certainly likes it initially as this gives a big green light for the US/Japan yield gap to continue upwards. (assuming Mr Trump and the Fed do what they say they’ll do) looking back on 2016 making assumptions turned out to be a dangerous thing but this decision should put a floor on USD/JPY over the years end.

Looking at the hourly chart for some short term inspiration, we have some resistance at the days’ highs at 117.57, some definite congestion around the 118.00 level and then previous hourly highs at 118.40 area.

Support lurks at 116.96 and then 116.54 the overnight low. The MACD and RSI give us no strong clues.


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