BOJ Holds Steady

The Japanese Yen has come under fresh selling pressure today on the back of the September BOJ meeting yesterday. The Bank of Japan held rates unchanged at yesterday’s meeting, in line with expectations. Explaining its decision, the bank cited the “extremely high uncertainties” facing both the domestic and global economy and noted the need to continue “patiently” providing support through monetary easing.

Policy Divergence Back on Deck

Over recent months, the conversation around a potential shift in BOJ policy has grown more prominent. The YCC target shift at the last meeting was seen by some as laying the groundwork for a rate increase. However, yesterday’s meeting saw the bank reaffirming its commitment to easing and a ruling out of any near-term rate hikes. The message from the BOJ yesterday suggests that traders were premature in anticipating any forthcoming tightening and, as such, a repricing of BOJ rate expectations is likely to lead JPY lower near-term. Indeed, the BOJ’s message feels firmly contrasted with what we heard from the Fed this week, meaning that USDJPY is likely to stay supported near-term.

Technical Views

USDJPY

The rally in USDJPY has stalled for now along the top of the bull channel. With growing bearish divergence, risks of a correction lower are growing. However, while the 145 level holds as support the focus is on a further push higher and a challenge of the 151.81 level next in line with overall bull trend.