USDJPY

09:04, 23 October

Rallies Towards Key 113 Level

In the last week, the USDJPY has rallied well to come back within reach of the key 113 level after falling heavily in the last few weeks from 2018 high above 114.50. The 113 level provided stiff resistance to the currency pair back in July and forcing it lower strongly so it may play a role again. Throughout September the USDJPY surged higher from the key 111 level up to resistance at 113 for a few days before pushing higher to 2018 high above 114.50. 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 a then 2018 high just above 113 before falling strongly to the 111 level where it enjoyed solid support again.

 

Around the 114 level, the USDJPY met stiff resistance throughout 2017, therefore, it was little surprising that it was sold off again in the last week above this level. The 111 level will be 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 well beyond. 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, it has since climbed steadily higher since March to return to its current trading levels.

Bank of Japan Governor (BOJ) Haruhiko Kuroda has said that steady interest rate rises by the U.S. Federal Reserve were "basically good" for the world economy, ignoring concerns that higher US rates could hurt Asian economies by triggering capital outflows."Gradual normalisation with a clear statement of (the Fed's) intention and future policy ... That's basically good for the world economy", he said.Kuroda said the BOJ was facing a slightly different challenge than that of the Federal Reserve as it was taking longer to achieve its inflation target of 2%, reiterating his resolve to maintain a massive stimulus programme in Japan for now.However Governor Kuroda wasn’t as excited about the ongoing trade tensions and the risks associated with them, as he described them as of a "rather unusual" scale and a "new development" for the global economy.The other issue he expressed concern about was the ageing population.An ageing population may also pose "serious challenges" for many countries as it could require central banks to cut rates more than before to boost their low-growth economies, he said."Ageing society is seen not only in Japan but in many European and emerging countries. It's becoming a common challenge," Kuroda said."An ageing population tends to reduce medium-term growth potential ... This would make monetary policy more challenging in the future."