BOJ kept overnight rate at 0.1% and maintained Asset Purchase target at 76 Trillion Yen during today’s rate decision as expected. Despite the accompanying statement saying that BOJ will pursue “aggressive monetary easing”, USD/JPY actually traded lower. This reaction is something we’ve observed recently during recent RBA’s decision and BOJ nomination speeches. Market is getting impatient with the lack of action, and more talks about “aggressive monetary easing” without actually doing easing will only incur further wrath from the market. However, in current case, market’s “wrath” only sums up to be less than 20 pips, with prices falling from under 94.0 to hit 93.80. Unlike AUD/USD which rallied 40 pips higher, USD/JPY’s relative mute response is an indication that traders are giving BOJ one final chance – April Rate Decision – when Kuroda and the 2 new deputy Governors to do something of significance.
Price has recovered after finding support along current rising trendline. The inability for bears to test 93.7 is a testament that residual bulls are still in force. The forward looking Kumo is still bullish, while Stochastic readings is threatening to form an interim bottom with a Stoch/Signal cross. Should 93.7 be broken, 93.0 support will open up which may coincide with Stoch readings heading lower towards oversold region.
The short-term bullishness is not felt in the long-term chart with price still stuck in the consolidation region since early Feb. 94.6 remains a strong resistance while support around 92.5 will help to prevent price from entering into the current Kumo. Stochastic readings shows space for upside, though readings will most likely enter into Overbought regions should price retest 94.6 once again.
It is clear that the BOJ decision did not change the overall outlook of Yen. However, from the immediate reaction of market, we can tell that a good portion of traders may be hoping for Kuroda to come out with some shocking revelation come April. Though this optimism is certainly keeping USD/JPY afloat, such hopes may turn into strong disappointment if Kuroda fails to push the right buttons in April. Conversely, even if Kuroda manage to deliver something special, higher expectations will lower the immediate reactions, or perhaps even result in a reversal on a typical “buy the rumor, sell the news” maneuver. This place long-term outlook of USD/JPY on the backfoot, unless Kuroda announce a measure that will truly surprise the staunchest of Abenomics follower.
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