Yen Falls Following BOJ Meeting
USDJPY is rallying today on the back of a more dovish tone from the BOJ overnight. The bank held rates unchanged, as expected, but struck a far-less-hawkish tone than many were expecting. Governor Ueda warned of the economic risks linked to the ongoing US trade war, which mean that the outlook is less reliable than before. The bank now expects inflation and wage pressures to cool in coming months, creating a delay in meeting the BOJ’s 2% CPI target.
BOJ to Remain Flexible
In light of these risks, Ueda warned that the BOJ would need to be flexible with its policy actions. If tariffs are reversed, Ueda said the bank has room to raise rates quickly but while these risks remain there is no need to pursue a faster pace of tightening.
US Data Next
JPY has fallen sharply on the back of the meeting with traders scaling back their near-term BOJ hiking expectations accordingly. Looking ahead, focus is now on upcoming US data tomorrow with the latest labour market reports due. If we see any upside surprise in the data sets this could fuel a sharper recovery in USDJPY near-term.
Technical Views
USDJPY
The sell off in USDJPY has stalled for now with price rebounding off the 140.59 lows. Market is currently testing 144.32 resistance ahead of the more important hurdle at 146.81 where we have the bear trend line also. Bears need to defend that level to maintain the bearish trend.
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