USDJPY

09:05, 28 March

Remains Steady Above 109 as BOJ Loses Optimism

In the last few weeks the USDJPY has steadily eased lower from a two month high above 112 down to a range right around 110. The 112 level has been significant in the last six months or so providing support to the currency pair in the last few months of 2018 whilst offering resistance in the last month forcing it lower. 
Throughout this year the USDJPY has done well to rally higher from a significant drop at the start of the year which saw it plummet to below 103, where it has steadily climbed higher to the 112 level.

The 110 level has also provided some support in the last week or so pushing the USDJPY back into the range between 110 and 112. Throughout most of December 2018, the USDJPY fell sharply from another well established range between 112 and 114, culminating in the sharp drop to start this year. Throughout that range, the USDJPY displayed a number of reversal candlesticks at the resistance level at 114 indicating how strong that level was. The 114 level remains some distance away but is likely to play a role again should the USDJPY return there.

The 113 level may also play a role should the USDJPY be able to push through resistance at 112, as the 113 level provided stiff resistance to the currency pair back in July 2018, forcing it lower strongly. Throughout September the USDJPY surged higher from 111 up to resistance at 113 for a few days before pushing higher to the 2018 high above 114.50.

A couple of weeks ago the Bank of Japan (BOJ) offered a bleaker picture of the economy and left its ultra-easy monetary policy on hold, but Governor Haruhiko Kuroda cautioned against undue pessimism.  Japan's central bank has said that Japan's exports and production have shown some weakness, which is a distinct downgrade from its January assessment that they were on an increasing trend.  Recognising matters outside its borders, the BOJ cut its assessment on overseas economies to say they are showing signs of slowdown, whilst it also revised down its view on exports and output.  The BOJ also kept its view that Japan’s economy is expanding moderately but added a phrase that “exports and output have been affected by slowing overseas growth.”  Japan’s exports posted their biggest decline in more than two years in January as China-bound shipments fell drastically.  Factory output also posted the biggest decline in a year in that month, a sign slowing global demand was taking its toll.  The sharp deterioration in exports and industrial production will be a serious concern for the BOJ.