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Japanese Yen Awaits Kuroda, Intervention Threat, Key US Inflation Data After Dovish BoJ

Japanese Yen Awaits Kuroda, Intervention Threat, Key US Inflation Data After Dovish BoJ

Daniel Dubrovsky, Senior Strategist

Japanese Yen, USD/JPY, Bank of Japan, Kuroda, PCE, Technical Analysis – Market Update

  • Japanese Yen marks time on still dovish Bank of Japan
  • Intervention remains a volatile threat to USD/JPY ahead
  • Eyes on Kuroda and the Fed’s preferred inflation gauge

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The Japanese Yen marked time after the Bank of Japan kept all the usual policy settings unchanged in October. This left the policy balance rate and 10-year government bond yield target at -0.1% and 0.0%, respectively. Traders were probably keener to hear about the currency itself given efforts from the government to intervene in foreign exchange markets to prop up the currency.

To that extent, the BoJ offered little. It mentioned that they need to watch FX and its impact on the economy. What is increasingly interesting is that the BoJ revised higher fiscal-year 2022 core CPI projections to 2.9% from 2.3% previously. Last week, local inflation figures for September surprised higher. Meanwhile, the government announced a USD200 billion economic package to help cope with inflation.

Despite this and slight upward revisions to fiscal-year 2023 and 2024 inflation projections, the central bank still noted that it will “add to easing without hesitation if needed”. As such, the BoJ continues to be a key outlier in the developed world. Fundamentally speaking, the central bank’s strong dovish stance will likely continue weighing against the Japanese Yen.

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All eyes now turn to Governor Haruhiko Kuroda’s press briefing at 6:30 GMT. As a reminder, after the last BoJ rate decision, Japan’s Finance Ministry conducted its first intervention in decades to bolster the Yen. As such, traders ought to proceed here with some caution. Another similar performance could produce wild gyrations in USD/JPY.

Further along, the focus will shift to the Federal Reserve’s preferred gauge of inflation. At 12:30 GMT, PCE Core is expected to cross the wires at 5.2% y/y, up from 4.9% prior. Another strong print could bring forward hawkish Fed policy expectations, pushing Treasury yields back higher after a few days of losses. That will probably offer some upside to USD/JPY as well.

USD/JPY BoJ Reaction

USD/JPY BoJ Reaction

Chart Created in TradingView

Japanese Yen Technical Analysis – Daily Chart

On the daily chart, USD/JPY is idling just above the September 22nd high at 145.903. It is holding as new support. Prices recently closed under the 20-day Simple Moving Average, offering near-term bearish implications. But, follow-through has been notably absent. Below, the 50-day SMA could hold as key support, maintaining the broader upside focus. Key resistance is the 61.8% Fibonacci extension at 149.937.

Japanese Yen Technical Analysis – Daily Chart

Chart Created in TradingView

--- Written by Daniel Dubrovsky, Senior Strategist for DailyFX.com

To contact Daniel, follow himon Twitter: @ddubrovskyFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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