USD/JPY jumps 12 pips as BOJ's Kuroda talks about downside risks to Japan's economy

USD/JPY extends early gains as BOJ's Kuroda sounds pessimistic on the economy.
BOJ stands ready to do more if required, Kuroda said while speaking in parliament.
The US stock futures are better bid and could be adding to downside pressures around Yen.

Omkar Godbole FXStreet Contributor

The offered tone around the Japanese Yen strengthened a few minutes ago, pushing the already bid USD/JPY higher from 107.87 from 107.75 after Bank of Japan's (BOJ) Kuroda warned about downside risks to Japan's economy.

"Japan's economy likely to remain in a severe state, prices to remain on a weak note due to pandemic impact, falling oil costs," said Kuroda while speaking in parliament and added further that the risks to Japan's economic outlook are skewed to the downside.

The governor expressed readiness to ease further without hesitation if needed. The central bank has been running a QE program seven years now and has interest rates set below zero for nearly four years.

Looking ahead, Kuroda's comments could continue to weigh over the Yen. Also, the futures on the S&P 500 are currently up 1.3% and major Asian equity indices like Japan's Nikkei and Hong Kong's Hang Seng are flashing green. With risk assets gaining ground, the path of least resistance of USD/JPY appears to be on the higher side.

At press time, the pair is trading near 107.84, representing a 0.16% gain on the day. USD/JPY has been largely restricted to a range of 108.10 to 107.30 since May 19.

A range breakout looks likely as the US stock market rally is showing no signs of slowing down. As of Friday, the S&P 500 index was up nearly 35% from the low of 2,192 observed in March. The stocks have been able to remain bid despite the escalating US-China tensions and fears of the second wave of coronavirus.

According to John Hopkins data, the US recorded 532 coronavirus deaths in the past 24 hours. Meanwhile, China says it had 29 new asymptomatic coronavirus cases in the mainland as of May 25 versus 40 on a preceding day.

Technical levels

1. R3 108.02
2. R2 107.9
3. R1 107.8
PP 107.69
1. S1 107.59
2. S2 107.48
3. S3 107.38

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

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