The Japanese yen gained against its US counterpart as the market waited for the release of the Bank of Japan’s policy meeting and economic data. The greenback lost the track as the pair tumbled at 117.100 levels after the opening bell on Monday.
At the time of writing, USD/JPY eased 0.20 percent to 117.15 with a session high of 117.111 and a session low of 117.038. The pair found resistance at 117.193 and support at 116.994.
In case of a breakthrough, the new resistance will be at 117.324 while a fall through would result in a new support at 116.994.
USD/JPY traded below its 20-day SMA of 117.226 and 50-day SMA of 117.406, extending the downtrend. The pair ended at 117.300 levels in the week ending December 23, not too far from its current fall.
From a wider perspective, the pair was still steady in the last quarter of the year. In the second week of December, USD/JPY made a significant jump from 115.000 levels to 118.000 levels as the US currency was boosted by the rate hike.
The band will likely open wider after a short period of contraction. In this case, the easing would be only temporary as the pair may go up eventually; however, the upcoming Japan’s economic data may intercede and lift the currency.
BOJ Minutes and More
The previous week, the BOJ decided to apply a negative interest rate of minus 0.1 percent to the policy-rate balances in current accounts held by financial institutions at the Bank. Later today, a speech will be delivered by Governor Kuroda to talk about the minutes of its most recent policy meeting at the Meeting of Councilors of Nippon Keidanren in Tokyo.
Governor Kuroda had kept its optimistic outlook over the recovery of the global economy and lauded the new policy framework of the Bank on its recent attendance at the Keidanren business lobby.
The global economy seems to be finally entering a new phase, by putting the negative legacy of the global financial crisis behind it, although considerable uncertainties lie ahead. By implementing this policy framework in an appropriate manner, the BOJ can take advantage of the recovery momentum of the global economy to produce an even greater driving force for Japan's economy.
Kuroda also defended the current 2 percent inflation target and its price hike target. If the Japanese economy finds its balance again, there will be an opportunity for currency appreciation.
Meanwhile, the market will be expecting Japan’s inflation, employment and household spending data on Tuesday. It will be followed by the industrial production and retail sales in Japan on Wednesday. These data will provide an outlook in the current condition of the Japanese economy and may indicate the probability of a bullish or bearish trend for the currency.
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