Daily Forex News and Watchlist: USD/JPY

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The BOJ shook the markets with its YCC policy tweak!

How will it affect USD/JPY’s short-term downtrend?

Before moving on, ICYMI, yesterday’s watchlist checked out EUR/USD’s ascending channel pattern ahead of ECB’s policy decision. Be sure to check out if it’s still a good play!

And now for the headlines that rocked the markets in the last trading sessions:

Fresh Market Headlines & Economic Data:

ECB raised the deposit rate to 3.75% as expected on Thursday; signaled that the hiking regime may be nearing the end, and that a hold at the next meeting is on the table along with a hike.

ECB to stop paying interest rates on reserves deposited by European banks, effective in September

Advanced U.S. GDP for Q2 2023: 2.4% y/y (1.8% y/y forecast) 2.0% y/y previous); Adv Price Index q/q: 2.2% q/q (3.2% q/q forecast; 4.1% q/q previous)

U.S. initial jobless claims fell below expectations to a five-month low of 221K (228K previous) in the week ending July 22

U.S. Durable Goods Orders for June: 4.7% m/m (0.6% m/m forecast; 2.0% m/m previous); Core Durable Goods Orders came in at 0.6% m/m (0.0% m/m forecast; 0.7% m/m previous)

U.S. Pending Home Sales for June: 0.3% m/m (-0.7% m/m forecast; -2.5% m/m previous)

Australia’s producer price inflation slowed down from 1.0% to 0.5% q/q in Q1 (+3.9% y/y), the slowest since March 2021

BOJ kept its interest rates steady at -0.10%

BOJ surprised the markets by tweaking its Yield Curve Control policy, raising the upper limits of its fixed-rate bond-buying from 0.5% to within 1.0% of the 0% target, a move seen as preparation for an exit from accommodative monetary policy.

France’s GDP accelerated from 0.1% to 0.5% q/q in Q2 as a rebound in exports offset lower consumption and slower investment growth

Germany exits recession at 0.0% in Q2 (vs. 0.1% expected, -0.1% previous)

Price Action News

Overlay of JPY Pairs 15-min Charts

Overlay of JPY Pairs 15-min Charts

In case you missed it, the Bank of Japan (BOJ) shook the markets earlier today by adjusting its Yield Curve Control policies.

The central bank still maintained its -0.10% interest rate and its 0% target for its 10-year government bond yields. However, it also said that it would offer to purchase 10-year JGBs at 1.0% through fixed-rate operations, wider than the 0.5% upper limit it set eons ago.

The give in the BOJ’s YCC policies was seen as the start of policy normalization for the uber dovish central bank. But Governor Ueda said that it’s not policy normalization, sharing that “Responding after upward risks materialize would put us behind the curve, and make the side-effects very large. The risk of us being forced to abandon YCC against our will is not zero. That’s why we need to act pre-emptively.

In any case, the BOJ’s decision sent U.S. and European bonds lower as investors speculated that JGB yield hunters would soon flock to Japan. Meanwhile, the yen was all over the charts. It dropped during the news release, jumped on the YCC headline, and then erased its intraday gains by the European session trading.

Canada’s monthly GDP at 12:30 pm GMT
U.S. core PCE price index at 12:30 pm GMT
U.S. quarterly employment cost index at 12:30 pm GMT
U.S. revised UoM consumer sentiment and inflation expectations at 2:00 pm GMT

Use our new Currency Heat Map to quickly see a visual overview of the forex market’s price action! 🔥 🗺️

USD/JPY 15-min Forex

USD/JPY 15-min Forex Chart by TV

As mentioned above, JPY has erased most of its intraday gains against its major counterparts.

In USD/JPY’s case, the pair is back at the 140.00 major psychological handle after finding resistance at the S1 (138.36) of today’s Pivot Points.

Let’s see if today’s U.S. core PCE price index report can inspire another trip lower.

Softer price increases would make it easy for USD sellers to take their cues from the 100 and 200 SMA resistance sitting near today’s Pivot Points. After all, the 140.00 psychological level is also near a trend line resistance that’s been around all week.

Look out for sustained selling below the trend line, which could drag USD/JPY back to its intraday lows.

If today’s European and U.S. session themes encourage more JPY-selling and USD-buying, however, then you should also be ready to aim for previous areas of interest like 141.00.


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