Yen rally continues, BoJ stays the course

The Japanese yen continues to flex its muscles, as USD/JPY has dropped for a fifth successive day. On Friday, the pair is trading at 104.43, down 0.29% on the day. USD/JPY is down 1.65% this week and touched a 7-week low earlier in the day.

It has been an eventful week in Japan. Yoshihide Suga became the new prime minister, replacing Shinzo Abe, who resigned due to poor health. This marked the first leadership change in Japan in eight years, but the transition was a smooth one and the Japanese yen didn’t miss a beat, as it continued to head higher.

BoJ will maintain easing

The Bank of Japan held its policy meeting on Thursday, and the message was more of the same from the bank. BoJ Governor Haruhiko Kuroda pledged to maintain the central bank’s monetary stimulus, in order to support the economy, which is in a recession in the wake of the devastating toll of Covid-19. Still, the BoJ sounded somewhat optimistic, saying that “economic activity has resumed gradually and is picking up its pace of growth”.

The BoJ has clearly changed its tune; back in July, it warned that economic conditions were “severe”. Policymakers maintained interest rates at -0.10% and also kept emergency funding programs for businesses in place. Investors appeared to share the bank’s optimism that the economy is headed in the right direction, as the yen posted slight gains on Thursday.

US Open – A disappointing week

USD/JPY Technical Analysis

  • USD/JPY broke below support at 104.45 in the Asian session. This is followed by support at 104.16
  • There is resistance at 105.10. The next resistance line is at 105.46

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.
Kenny Fisher

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