USD/JPY Forecast: Break below 110.00 likely as Kuroda sets 1.5% as a trigger for policy change
|The USD/JPY looks set to break below 110.00 levels soon after the Bank of Japan (BOJ) governor Kuroda set 1.5 percent inflation rate as a trigger for change in the current monetary policy.
1.5 percent inflation target a trigger for policy change
As per Reuters report, BOJ Governor Haruhiko Kuroda at his post-meeting news conference said-
"Japan’s economy is expanding moderately but inflation remains weak. Other countries are facing similar situations, but unlike these countries, many of whom are seeing inflation move around 1.5 percent, inflation excluding energy costs is barely above zero percent in Japan"
Kuroda's comment indirectly says that policymakers would start telegraphing a change in the monetary policy once inflation nears 1.5 percent. So, the new trigger has been brought down/revised lower to 1.5 percent from 2.0 percent.
Hence, the Yen is likely to price-in the drop (from 2% to 1.5%) in the trigger for policy change.
Change in language on inflation could boost Yen
"Inflation expectations are moving sideways recently", the BOJ said in its quarterly report compared to the previous report, which talked about the weakness in inflation expectations.
The change in language on inflation expectations and the downward revision of the trigger for policy change is likely being read as hawkish development, indicates the decline in USD/JPY from 111.18 to 110.70 in the last two hours.
Further, the technical setup favors downside, hence, the spot looks set to explore sub-110.00 levels soon.
4-hour chart
- The above chart shows a symmetrical triangle pattern.
View
- A downside break of the symmetrical triangle looks likely, courtesy of the above discussed macro/fundamental factors. Such a move would signal continuation of the sell-off from the high of 113.386 and open doors for a sell-off to 108.72 (50% Fib R of 98.787-118.662).
- Bullish scenario - An upside break of the symmetrical triangle pattern could yield a move to 111.48 (Jan. 19 high).
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.