Year: 2025

The USD/JPY is up 0.85% to near 156.90 during the European trading session on Friday. The pair surges as the Japanese Yen (JPY) underperforms across the board, following the Bank of Japan (BoJ) monetary policy announcement.

It’s all about the BOJ so far today and we’re seeing some modest moves in reaction as the Japanese yen runs lower. That despite the fact that the central bank delivered a 25 bps rate hike to bring its short-term policy rate to 0.75% – its highest since 1995.

So, what gives?

After dropping in the first half of the week, the pair is seeing a solid rebound. That helped by a double-bottom bounce off the early December lows just below the 155.00 mark. However, the run higher from 155.80 to 156.80 levels now owes very much to the BOJ.

The Japanese central bank might have raised interest rates but this seems to be more of a buy the rumour, sell the fact reaction. Now, BOJ governor Ueda was not explicit in pushing another rate hike in March. However, he did leave the door open for that as you would expect him to.

So, to say that Ueda was more dovish would be misplaced as I think he pretty much played things out as how he was supposed to and what you would expect him to given the tedious position between the BOJ and the incumbent government.

If so, why did the Japanese yen fall in this case?

I would say it’s markets just taking all bets off for the time being and resetting on what to expect of the BOJ moving forward. The thing about the rate hike today is that it is one that the BOJ could just barely get away with.

The threshold and trigger point for the next rate hike will be very, very much higher. And it will definitely need very strong convincing from the upcoming spring wage negotiations. So unless that delivers a compelling argument for the BOJ to move again, policymakers might be stuck on the sidelines for a prolonged period.

Going back to USD/JPY, the pair now nudges closer to the December highs of 156.90-95 and that will be a key resistance point to watch out for. A break above that will pave the way for another extension to the rebound towards the November high of 157.89 potentially.

Just be wary that the big move we’re seeing today, which is the largest gain in the pair since 19 November, is coming at a time just before the Christmas and New Year holiday period for markets.

As such, I wouldn’t advise chasing such a move as thin liquidity conditions may exacerbate volatility in markets in the next two weeks. And that means allowing room for market moves that might or might not make too much sense.

This article was written by Justin Low at investinglive.com.

The Pound Sterling (GBP) faces mild selling pressure against its major peers in Friday’s early European session after data from the United Kingdom (UK) showed that Retail Sales unexpectedly declined in November.

Yen weakened broadly today despite the BoJ delivering a widely expected 25bps rate hike. The move pushed 10-year JGB yields above the psychologically important 2% level for the first time since 1999, but higher yields failed to translate into currency support. Part of the reaction reflects a classic sell-on-news dynamic. With the long-anticipated BoJ decision […]

The post Yen Slides After BoJ Hike as Markets Sell the News, Dollar Rebounds on CPI Doubts appeared first on ActionForex.

KEY POINTS:

• USDINR continues to consolidate below a key resistance around the 90.40 level
• The RBI intervention paused the selloff in the Indian Rupee
• The main trend remains to the upside
• In the short-term, traders will look for technical breaks

FUNDAMENTAL
OVERVIEW

USD:

The US
CPI yesterday surprised to the downside across the board, but as we’ve seen
with the NFP
report, the market took the data with a pinch of salt. The dollar weakened
following the CPI release but eventually recovered all the losses and strengthened
across the board.

It should
also be noted that we got the US
Jobless Claims yesterday and the data was strong. The Initial Claims remain
around the same low levels we got used to for years, but Continuing Claims dropped
to the lowest level since May.

The next
NFP report won’t have the shutdown related issues, so we will get a clearer
view of the US labour market conditions. For now, I’d say the greenback is kind
of neutral, although skewed to the downside a bit.

INR:

The RBI
intervened this
week to stop the recent selloff in the Indian Rupee. The last intervention was
in October, but as it usually happens when the fundamentals remain against a
currency, the INR eventually fell to new lows.

We can expect the
Rupee to weaken again in the next months, but in the short-term, traders will
look for key technical breaks before piling into USDINR longs again.

USDINR TECHNICAL
ANALYSIS – DAILY TIMEFRAME

On the daily
chart, we can see that USDINR sold off from the upper bound of the rising
channel following the RBI’s intervention. The natural target
for the sellers remains the lower bound of the channel around the 89.00 level,
but they will need to keep the price below the key zones. The buyers, on the
other hand, will continue to step in around the key levels to keep targeting
new record highs.

USDINR TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME

On the 4 hour
chart, we can see that we have a strong resistance around the 90.40 level. The
sellers continue to step in there with a defined risk above the level to
position for a drop into the 89.70 level next. The buyers, on the
other hand, will want to see the price rising above the 90.40 level to pile in
for a rally into new all-time highs.

USDINR TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME

On the 1 hour
chart, there’s not much else we can add here as the sellers will likely
continue to step in around the resistance to target new lows, while the buyers
will look for a break higher to position for a rally into a new record high.

This article was written by Giuseppe Dellamotta at investinglive.com.