After the BOJ maintained monetary policy constant and lowered down FY 2021/22 economic predictions, the USD/JPY remains on the offensive.
Bulls in the US dollar applaud the risk-off sentiment while ignoring falling Treasury yields.
Outside of Asia-Pacific, virus concerns are growing, and Tokyo has seen a six-month peak in infections.
The key, according to BOJ’s Kuroda, will be US data and risk catalysts.
The USD/JPY exchange rate pays little attention to the Bank of Japan’s (BOJ) monetary policy statements, remaining bullish around 110.00, up 0.16 percent intraday, on early Friday. The explanation for this might be connected to the US dollar’s continued gain amid a risk-off mindset and a decision by the Japanese central bank that was already expected.
During the July monetary policy meeting, the BOJ kept the benchmark policy rate on hold at -10 basis points (bps), while continuing to buy J-REITS at a rate of up to JPY180 billion per year. According to Reuters, the Japanese central bank stated, “Japan’s economy remains in a bad state but is improving as a trend.”
Read: BOJ maintains its stance in July, but downgrades growth forecasts for FYs 2022 and 2023.
Aside from the BOJ’s inaction, the safe-haven demand for the US currency also drives USD/JPY values upward. By press time, the US Dollar Index (DXY) had extended the previous day’s recovery advances to 92.62.
The reappearance of the coronavirus has been the primary driver of the market’s recent flight to safety. Unfortunately, the northern hemisphere has recently entered the Asia-Pacific region’s league of multi-day high infections and rapid transmission of the covid form. The UK had the biggest daily case count since January the day before, while infections in Tokyo had increased by the most in six months. In addition, Australia has extended local lockdowns in response to an increase in cases, while Los Angeles has recalled the mask rule.
Read more: S&P 500 futures fall as coronavirus cases rise in NSW, and LA reinstates the mask mandate
In other markets, risk appetite is weighed down by uncertainty about the Fed’s next steps, despite Chairman Jerome Powell’s insistence for no monetary policy changes. Fresh tensions between the United States and China, as well as the increasing Brexit squabbles, are all contributing to the market’s pessimism.
S&P 500 Futures are slightly lower amid these moves, while the US 10-year Treasury yield rises two basis points (bps) to break a two-day downtrend of approximately 1.31 percent. Furthermore, by press time, Japan’s Nikkei 225 had lost 1.0 percent intraday.
Because the BOJ fulfilled market expectations, USD/JPY traders will be looking for immediate direction from Governor Haruhiko Kuroda’s remarks. The US consumer-centric figures and risk-related news, on the other hand, will be a rather large driver.
During the recent falls, traders should keep an eye on a six-week-old ascending support line near 109.70, as well as the 100-day moving average (DMA) around 109.40. Meanwhile, the pair’s short-term gains are limited by a downward sloping trend line from July 02 near 110.50./n
