USDJPY Unchanged as BOJ Keeps Rates Steady in Despite Inflation Turning Negative
USDJPY is trading around its open price this morning after the BOJ kept rates steady despite Japan’s inflation turning negative. The currency pair is trading roughly 4.6 pips below its opening price at 107.56.
In an emergency meeting earlier today, the BOJ kept its short-term interest rate steady at -0.10% and its target for 10-year JGB at 0.00%. Japanese policymakers also announced that it would soon announce details of its new 75 trillion JPY loan scheme aimed at helping small- to medium-sized businesses. As usual, the BOJ warned that it would ease monetary policy further if necessary.
The BOJ sitting on the sidelines came as a surprise to a few market participants. This is because Japan’s national CPI printed in the negative territory for the first time since 2016 when it printed at -0.2%. It also came in lower than the expected -0.1% reading. Some investors thought that this would be enough to convince the BOJ ease policy further.
On the 1-hour time frame, it can be seen that USDJPY is currently testing a confluence of support. By connecting the lows of May 8, May 14, May 15, and May 20, we can see that the currency pair is trading around the trendline support at 107.50. This area also coincides with the 100 SMA and the area between the 38.2% Fib level (drawing the Fibonacci retracement tool from the low of May 15 to the high of May 19). Reversal candlesticks at this price level could mean that USDJPY may soon retest its May 19 highs at 108.07.
On the other hand, a strong close below 107.50 could mean that the uptrend on USDJPY has been invalidated. It could indicate more downside potential for the currency pair. With that said, it could fall to 106.85 where it may test the lows of May 14 and May 15 for support.