Haruhiko Kuroda spoke to the public for the first time today after nominated for BOJ Governor by Shinzo Abe last week. In his speech, he said the same 3 words that Draghi used to great effect back in 2012 – “Whatever It Takes”. Kuroda has vowed to do everything at his disposal to reach the 2% inflation target, vowing to embark on “bolder” monetary steps (whatever that means), and policies that are in line with Japanese economic development (which is saying he will do a lot as Japanese economy is currently in the pits). According to Kuroda, the 2% inflation target is considered a “global standard” that most countries can and should achieve in 2 years. Whether that is true or not, it is apparent that Kuroda has what it takes to toe international monetary relationships, already justifying BOJ’s actions and targets by insinuating that the rest of the world are already doing it.
There are a lot of dovish talks in the press conference. However, USD/JPY failed to climb higher in the face of more “bold” intervention promised by Kuroda. JPY in fact strengthened somewhat, trading slightly lower than Monday’s opening level. Perhaps market is indeed tired and bored by all the rhetoric thrown by Shinzo Abe and his ministers. Whatever Kuroda said is merely a mirror of what the market already knows which should have been mostly priced in seeing how far USD/JPY has climbed since the turn of the year.
Hourly Chart is showing a ceiling just under 93.8. Stochastic is heavily Overbought with readings looking to head lower. However, a bearish confirmation should be sought as there is no evidence from Price Action that the bullish cycle/momentum has ended. Preferably price should fall below 92.80 resistance turned support to open up bearish objective of 91.30. A break below 92.8 should also coincide with Stoch reading falling below 80.0 for a more firm bearish signal from Stoch as well.
Daily Chart is also bearish with price facing resistance below the rising trendline. The outlook is bearish pending price to break below the 92.50 floor. The issue with such price action is that there remains a likelihood of price to trade higher, straddling below the rising trendline. Hence traders should be aware of such possibility and not regard a bounce lower from here as certainty. Stoch readings suggest that readings could form an interim bottom from here out, which supports the scenario for price to trade higher.
Fundamentally, it is important to note the reaction (or lack-there-of) from Kuroda’s speech. Even his offer to bring open-ended asset purchases earlier failed to impress the markets, which suggest that the BOJ’s all-talk-no-action effort could have seen its last legs in pushing JPY weaker. If that is true, USD/JPY and all other JPY pair direction will be much more sensitive and influenced by risk trends (as seen in the last 2 weeks), and we could see a strengthening of JPY significantly if market reacts badly to the US sequester cuts that are looking more likely than ever before.
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