USDJPY targets 106.00 as Kuroda shifts tone on interest rates
The USDJPY pair declined slightly as most analysts started to read the tea leaves from the Bank of Japan (BOJ) governor, Hurohiko Kuroda. The pair also declined as global risks appeared to be rising.
USD/JPY reacts to Kuroda statements
The Bank of Japan has been among the most active central banks in the current coronavirus crisis. The bank has supplied adequate liquidity in the market and removed the cap of its quantitative easing program.
Unlike other banks, the BOJ has not slashed interest rates mostly because of how they are. The rates have been in the negative territory for years.
Now, according to Bloomberg, the bank governor appears to be ranking rate cuts lower. In a statement to Japanese lawmakers, the governor listed more rate cuts last. He also ranked the rate cut last earlier today in a statement to the press. He said:
“There are various options including the expansion of quantitative easing and increasing methods of market operations and lowering interest rates.”
This was a change of his previous statements. In the past, he used to say that the policy options included cutting rates, lowering the yields of the government bonds, and expanding the balance sheet.
Japanese yen gains as risks rise
The USDJPY is also falling because of the rising global risks. In a statement yesterday, Jerome Powell said that the US and the entire world economy was facing increased risks. The same sentiment was repeated by the OECD, which warned of the risks on the current debts. Also, in addition to the coronavirus, there are risks on trade between the United States and China.
The Japanese yen is usually seen as a safe haven currency. This means that its value tends to rise when risks rise.
On the four-hour chart, we see that the USDJPY has been on a downward trend since April. The price recently hit resistance at the 38.2% Fibonacci retracement level. Also, the price is slightly below the 50-day and 100-day EMA. Therefore, I expect the pair to continue moving lower as the bears attempt to test the 50% retracement at 104.50 or even the 105.00 support level.
On the flip side, a move above 107.70 will invalidate this thesis of the USDJPY. This price is above the descending pink trendline and the 38.2% retracement level.