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10:23, 13 ноября

Daily Analysis

In the last three days the USDJPY has eased back towards 109 which the currency pair has been moving towards over the last three weeks or so. During this period it has met some resistance at this level before breaking through last week before easing back and now finding some support at. The 109 level has been repelling prices strongly in the last four months so it is no surprise it struggled in the last few weeks.

In the first half of September and after spending most of August trading in a narrow range right around the 106 level, the USDJPY rallied and move up to its highest level in one month above the 108 level.

Prior to this consolidation period the USDJPY fell away sharply from the key 109 level down to its lowest level this year near 105, which was then lowered two weeks later to below 104.50. Throughout July the USDJPY had been meeting resistance at the 109 level as it has generally traded in a narrow range between 108 and 109 for some time. However, in the last four months, the USDJPY has moved considerably lower falling from above 112 down to its 2019 low near 104.50. Should the USDJPY rally from its present consolidation range, the 109 level remains a key level and is likely to play a role providing resistance, as it continues to loom large.

In the second half of May, it was enjoying some support from around 109 and trading back and forth between 109 and 110.50, before dropping through the support at 109 and moving lower, and then meeting resistance at this level. Despite it being some distance away, the 112 level remains very significant as it provided support to the currency pair in the last few months of 2018 whilst offering strong resistance in the period since.

During their September meeting, the Bank of Japan (BOJ) board members discussed the possibility of increasing their stimulus package.  The BOJ finds itself in a dilemma as the central bank has had to maintain a massive stimulus package yet inflation hasn’t responded.In a clearly divided central bank, some stated that more attention needed to be paid to the impact of having very low interest rates for an extended period of time, including bank profits.  “A comprehensive examination was needed on the chance that financial institutions’ profitability will decline further, and an increasing number of them would take excessive risks,” the minutes quoted some members.  During the September meeting, the BOJ kept interest rates unchanged but indicated the possibility of further easing.  Not surprisingly, their minutes did show some concern about the ongoing US – China trade wars.  “There’s a risk a delay in pick-up of overseas growth could hurt Japan’s economy and prices. As such, the BOJ must start examining a desirable policy response, with an eye on the potential side effects,” one member was quoted as saying.