- USD/JPY initially refreshed intraday high before a knee-jerk reaction to BOJ’s inaction.
- BOJ kept monetary policy unchanged but mentioned readiness to watch FX reaction for the first time.
- Downbeat yields, firmer equities and US dollar rebound are extra catalysts helping the yen pair buyers.
USD/JPY refreshed its intraday high before falling to 132.40, also bouncing back to 134.00 by the press time, as the Bank of Japan (BOJ) matches wide market expectations of announcing no change to its monetary policies on Friday. In doing so, the USD/JPY pair extends the early Asian session rebound from the weekly low to reverse the week’s losses and poke 134.50 level, around 134.25 by the press time.
BOJ kept its benchmark rate near -0.10% while also holding the 0.0% target for the Japanese Government Bond (JGBs) at the end of two-day monetary policy meeting.
While the inaction was widely anticipated, a mention of the FX in the BOJ statement teased the yen sellers on announcement. “Need to watch impact of fx on economy, prices,” the BOJ statement mentioned. This could be the first such hint from the BOJ in a long time that directly connects to the FX intervention.
It’s worth noting that the US dollar rebound and market’s indecision also favored the USD/JPY bulls of late.
The US Dollar Index (DXY) recovers from the weekly near 103.40 to 104.10 at the latest. In doing so, the greenback gauge ignores downbeat Treasury yields. That said, US 10-year Treasury yields dropped during the last two consecutive days, to 3.243% by the press time, as the Fed’s 0.75 rate increase couldn’t impress bulls.
Moving on, BOJ Governor Haruhiko Kuroda is up for a press conference around 06:00 GMT and will be eyed for further directions. Following that, the US Industrial Production for May, expected at 0.4% versus 1.1% prior, will be the first to entertain traders ahead of the Fed’s Monetary Policy Report and Powell’s speech.
Technical analysis
USD/JPY stretches the bounce off 100-SMA on the four-hour chart as it crosses the one-week-old horizontal resistance area, surrounding 133.50-60. Given the RSI rebound from the oversold territory, coupled with the receding bearish bias of the MACD, the USD/JPY prices are likely to defend the latest recovery.
Alternatively, pullback moves may remain elusive until the quote stays beyond the 100-SMA level of 131.40.
