USD/JPY Rises as Bank of Japan Holds

December 19, 2016 Share Print 0

The Bank of Japan votes for no change by a majority of 7-2. USD/JPY rises 40 points.

The BoJ has held fast as expected. (see below)

*(JP) BOJ LEAVES INTEREST RATE ON EXCESS RESERVES (IOER) UNCHANGED AT -0.10%; AS EXPECTED Votes 7-2 to keep policy unchanged

Keeps 10-yr JGB yield target at ~0%

Will keep expanding monetary base until inflation exceeds 2% – Source TradeTheNews.com

The main take-outs were as follows,

* BOJ RAISES ECONOMIC ASSESSMENT< * BOJ: JAPAN'S ECONOMY CONTINUES TO RECOVER MODERATELY AS A TREND< * BOJ MAINTAINS PLEDGE TO BUY JGBS AT CURRENT PACE SO BALANCE OF ITS HOLDINGS INCREASES AT ANNUAL PACE OF 80 TRLN YEN< * BOJ: REVISES UP VIEW ON EXPORTS, OUTPUT< * BOJ: EXPORTS, OUTPUT PICKING UP< * BOJ: JAPAN ECONOMY LIKELY TO TURN TO MODERATE EXPANSION< * BOJ: RISKS TO OUTLOOK INCLUDE DEVELOPMENTS IN US ECONOMY, IMPACT OF US MONETARY POLICY ON GLOBAL MARKETS

source: Reuters

Unsurprisingly they have upgraded the outlook for exports given that USD/JPY is 10% higher (ie JPY weaker) since Mr Trump’s elections victory. Even more unsurprisingly, they say that “developments” (read the new President) in the US economy and higher US rates create uncertainties in their outlook. No argument there!

USD/JPY certainly likes it initially as this gives a big green light for the US/Japan yield gap to continue upwards. (assuming Mr Trump and the Fed do what they say they’ll do) looking back on 2016 making assumptions turned out to be a dangerous thing but this decision should put a floor on USD/JPY over the years end.

Looking at the hourly chart for some short term inspiration, we have some resistance at the days’ highs at 117.57, some definite congestion around the 118.00 level and then previous hourly highs at 118.40 area.

Support lurks at 116.96 and then 116.54 the overnight low. The MACD and RSI give us no strong clues.

USD/JPY Hourly Chart

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Jeffrey Halley

Senior Market Analyst, Asia Pacific, from 2016 to August 2022

With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley was OANDA’s Senior Market Analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes.

He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays.

A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV and Channel News Asia as well as in leading print publications such as The New York Times and The Wall Street Journal, among others.

He was born in New Zealand and holds an MBA from the Cass Business School.