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USD/JPY Plunges After BOJ Monetary Policy Decision And Abe's Concern

USD/JPY Plunges After BOJ Monetary Policy Decision And Abe's Concern

2014-10-07 05:35:00
Edward Hyon,
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Talking Points:

  • Bank of Japan Maintains Its Policy to Increase Monetary Base By 60-70 Trillion Yen.
  • Japan’s PM Abe is Concerned about Strong Yen on Small Businesses and Households.
  • USD/JPY Erases its Earlier Gains in the Session After BOJ and Abe.

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Bank of Japan had their monetary-policy decisions scheduled today. BOJ has announced its plans to retain the unconventional monetary policy to increase their monetary base by 60-70 trillion yen per annum. BOJ has also made slight changes in the wording in their monetary policy statement. The changes are in relation to the assessment on production, acknowledging the weakness in the industrial production sector and pointing to inventory adjustment as the cause of weakness. Moreover, BOJ’s Shirai has showed support for easing as intensive measure for the next two-years, but his proposal had been rejected by a vote showing 8 to 1. Besides these changes, BOJ has maintained their rhetoric to make policy adjustments as needed and BOJ aims to reach 2 percent inflation target in medium to long-term.

After the release of Bank of Japan Policy Decision and Statement, USD/JPY plunged to trade firmly below the psychologically important 109.00 level. This is on the backdrop of the comments made by Japan’s Prime Minister Shinzo Abe saying weaker yen can hurt small companies and households, which led to the Japanese Yen to strengthen against the US Dollar.

From a technical perspective, DailyFX Currency Strategist Ilya Spivak mentions near-term support to rest at 107.89 and resistance at 110.19 (23.6 percent Fibonacci Expansion). Meanwhile according to DailyFX Speculative Sentiment Index, the ratio of long to short positions in the GBP/USD stands at -1.20 as 45 percent of traders are long.

USD/JPY 5 Minute Chart

USD/JPY Plunges After BOJ Monetary Policy Decision And Abe's Concern

Daily Chart - Created Using FXCM Marketscope 2.0, Volume Indicator Available Here

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Edward Hyon, DailyFX Research Team

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