- USD / JPY registers a modest recovery from the nine-month lows set the previous day.
- A modest short hedging bounce in the USD turns out to be a key factor behind the pair’s rally.
- The stimulus hopes in the US could limit the USD recovery attempt and limit the pair’s gains.
- The latest monetary policy decision by the Bank of Japan does little to provide a significant boost.
The pair USD/JPY moves higher during the European session on Friday, although appears to be struggling to capitalize on the recovery move above the 103.50 region.
The pair has gained some positive traction on the last trading day of the week and has moved away from the nine-month lows, at levels below 103.00 touched on Thursday. The US dollar has seen a modest recovery from its two-and-a-half-year lows, which, in turn, has been seen as one of the key factors in extending some support to the USD / JPY.
The pair has held firm after the Bank of Japan announced its latest monetary policy decision and extended its special program aimed at alleviating corporate financial pressures for an additional six months. The BoJ has maintained the 10-year Japanese government bond yield target at around 0% and the short-term interest target at -0.1%.
At the press conference after the meeting, Bank of Japan Governor Haruhiko Kuroda said that control of the yield curve is working properly and that the central bank does not plan to review negative rates. Kuroda has further added that it will take time to reach the 2% price target and that the economic recovery will only be moderate.
In the absence of a major change in the outlook for monetary policy, the BoJ has turned out not to be a market event. Having said that, Prospects for further US fiscal stimulus have prevented USD bulls from opening aggressive positions and has limited the gains of the USD / JPY pair. Therefore, it will be wise to wait for some subsequent purchases before positioning yourself for a further recovery.
USD / JPY technical levels
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