USD/JPY edges higher around 110.00 on BOJ status-quo, downbeat forecasts
|- USD/JPY remains on the front foot after BOJ kept monetary policy unchanged and revised down FY 2021/22 economic forecasts.
- US dollar bulls cheer risk-off mood, ignore downbeat Treasury yields.
- Virus concerns intensify outside Asia–Pacific, Tokyo also marks six-month high infections.
- BOJ’s Kuroda eyed for immediate direction, US data, risk catalysts will be the key.
USD/JPY pays a little heed to the Bank of Japan’s (BOJ) monetary policy announcements, stays positive around 110.00, up 0.16% intraday, amid early Friday. The reason could be traced to the US dollar’s sustained strength amid risk-off mood and already expected move by the Japanese central bank.
BOJ keeps benchmark policy rate on hold at -10 basis points (bps) while maintaining its pledge to buy J-REITS at an annual pace of up to JPY180 billion during the July monetary policy meeting. In doing so, the Japanese central bank said, “Japan's economy remains in the severe state but picking up as a trend,” per Reuters.
Read: BOJ stands pat in July, downgrades FY 2021/22 growth outlook
In addition to the BOJ’s inaction, the US dollar’s safe-haven demand also propels USD/JPY prices. That said, US Dollar Index (DXY) extends the previous day’s recovery moves to 92.62 by the press time.
The coronavirus resurgence has been the main catalyst behind the market’s latest rush to risk safety. The northern hemisphere recently joined, unfortunately, the league of Asia-Pacific region with multi-day high infections and faster spread of the covid variant. The UK registered the highest daily cases since January the previous day while Tokyo’s infections also jumped the most in six months. Further, Australia’s extends local lockdowns amid a jump in cases while Los Angles recalled the mask mandate.
Read: S&P 500 futures drop amid spiking coronavirus cases in NSW, LA reinstates mask mandate
Elsewhere, the uncertainty over the Fed’s next moves, despite Chairman Jerome Powell’s push for no monetary policy adjustments also weighs on the risk appetite. Also, fresh US-China jitters and escalating Brexit tussles are additional factors to tear the market’s optimism.
Amid these plays, S&P 500 Futures print mild losses whereas the US 10-year Treasury yield gains two basis points (bps) to snap a two-day downtrend of around 1.31%. Further, Japan’s Nikkei 225 prints 1.0% intraday loss by the press time.
As the BOJ met market expectations, USD/JPY traders will pay close attention to Governor Haruhiko Kuroda’s comments for immediate direction. However, a comparatively major catalyst will be the US consumer-centric figures and risk-related news.
Technical analysis
A six-week-old ascending support line near 109.70, followed by the 100-DMA around 109.40, become important downside levels for the USD/JPY traders to watch during the fresh declines. Meanwhile, a downward sloping trend line from July 02 near 110.50 restricts the pair’s short-term advances.
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