USDJPY

12:42, 06 November

Consolidates Around Key 113 Level

In the last week or so the USDJPY has rallied well to return to the key 113 level where it has spent the last week consolidating. It has done well to regain some lost ground after falling early last month from a 2018 high above 114.50 down to below 112. The 113 level provided stiff resistance to the currency pair back in July and forcing it lower strongly so it is no surprise that the rally has been halted around that level for the moment. Throughout September the USDJPY surged higher from the key 111 level up to resistance at 113 for a few days before pushing higher to the 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. 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 114.50 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.

Speaking to business leaders in Nagoya on Monday, Bank of Japan (BOJ) Governor Haruhiko Kuroda said the central bank would “of course” seek an exit from ultra-easy policy when inflation reaches its 2% target.“When the BOJ seeks an exit from easy policy, the yield curve will steepen and interest rates will rise,” Kuroda said.However he also said that higher interest rates alone won’t fix structural problems that are weighing on regional banks’ profits, such as a dwindling population and a lack of funding demand as more firms relocate to bigger cities.“Over the past five years, Japan’s economy has clearly improved,” Mr Kuroda said. “Prices have improved steadily compared with five years ago, when the economy was suffering from deflation.“However, it has been taking time to achieve the price stability target of 2%.In such a situation where economic and price developments have been somewhat varied, it has become necessary to persistently continue with powerful monetary easing while considering both the positive effects and side effects of monetary policy in a balanced manner.”Mr Kuroda added that there was "no reason" now for the BOJ to follow in the footsteps of its US counterpart in normalising policy with inflation still distant from its 2% target.