09:40, 25 September

Eyes on Resistance at 113 as BOJ Keeps Policy Steady


The USDJPY has moved well in the last couple of weeks surging higher from the key 111 level up to a two month high just shy of the previous resistance level around 113. Throughout August the USDJPY was content to trade right around the key 111 level keeping a reasonably tight range for that time. In the middle of July, the USDJPY surged higher to 2018 high just above 113 before falling strongly to the 111 level where it enjoyed solid support again. With this sell off only a couple of months ago, the market will most likely watch this level for any signs that the USDJPY is sold off again and the resistance stands tall. The 111 level will then expected to offer support again should the USDJPY retreat from its current levels.

Towards the end of May, the USDJPY reached a four-month high above 111 before falling sharply in the week after and after forming a few solid reversal candlesticks around the recent peak. Since the end of March, the USDJPY had also rallied well from 15-month lows below 105 to return back to the key level of 107.50 and beyond. The 107.50 level supported the USDJPY late last year before providing stiff resistance on several occasions over the last few months. The 107.50 level blocked the USDJPY from moving higher for more than a week in early April, including another strong Doji candlestick indicating rejection at higher prices. A week later the level was finally broken.

After trading within a range roughly between 108 and 114 for most of last year, the USDJPY started off this year moving down towards the bottom of the range again, however then continued lower. The shorter term and medium term trends have since reversed since April and are confirming how strongly the USDJPY has reversed to return to the 111 level.

Today the Bank of Japan (BOJ) will release the minutes from its monetary policy meeting on 30th and 31st July. At that meeting, the central bank retained its massive monetary stimulus as expected, including the -0.1% interest rate on current accounts that financial institutions maintain at the bank. Last Wednesday the BOJ kept monetary policy steady and maintained its optimistic outlook on the economy. The central bank reiterated Wednesday that it would keep interest rates extremely low “for an extended period,” holding to forward guidance it first introduced in July. The decision to maintain its interest rate targets was made by a 7-2 vote with board members Goushi Kataoka and Yutaka Harada differing."Japan's economy is expanding moderately," the BOJ said in a statement announcing the policy decision. In an interview published a few weeks ago, Governor Haruhiko Kuroda said the Bank of Japan is unlikely to raise interest rates for “quite some time” and recent steps to make policy more flexible are not prepared for policy normalization.