The Bank of Japan announced on 14th Feb ’13 that they would be maintaining current interest rates at 0.10% and keeping Asset Purchase Program at 76 Trillion yen while Credit Loan program stays at 25 Trillion yen. In the statement, BOJ included a remark that they will be pursuing easing measures in order to achieve price goal “at the earliest possible time”. Though we already knew that BOJ will certainly ease, current language suggest that there is room for acceleration of stimulus. Nikkei 225 rose immediately following the announcement, while USD/JPY weakened somewhat, but did not move too far away resistance level of 93.50.
Ex-BOJ Deputy Governor Iwata – and current leading candidate for the soon-to-be vacant Governor position, mentioned that he sees USD/JPY still being overvalued despite hitting a 33-month high recently. To him, 95 Yen to the Dollar is “appropriate”, and 100 is reasonable correction. To date, BOJ has yet to announce a price target for USD/JPY for fear of international reprisal, hence such statements help to give speculators a target in sight, and it seems that we are still some distance away from it.
Overall, USD/JPY still looks heavy despite dovish statements by BOJ and the leading candidate for the Governor. Price has pulled back significantly from the highs shy of 94.50 and is currently trading just above the 93.50 level. Perhaps a more important reference level would be the rising trendline, which is suggesting that bullish momentum has been halted, though the distinction isn’t clear now. Stochastic indicator has just seen a Stoch/Signal cross which also suggest further downsides is possible.
Weekly chart does not share the same bearishness though, with price continuing to trade higher. The spinning top candlestick formed last week has been shrugged off easily, suggesting bullishness is still on the cards. 95 which is also the previous high back in May 2010 will provide resistance especially after Iwata has given traders a number to play with.
For full BOJ Statement, click here.
USD/JPY – Markets Await G-20 Meeting
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