Yen pairs take back losses after dovish Kuroda comments

BoJ Governor Kuroda’s dovish comments earlier sent JPY pairs higher after a strong Japanese CPI report. Japan’s December CPI report climbed to 4% YoY, as expected, to its highest level since 1981. This comes after a November reading of 3.8% YoY. In addition, the Core CPI (excludes fresh fish) increased to 4% YoY after a 3.7% YoY print a month earlier. Ex-Food and Energy CPI increased to 3% YoY vs a previous reading on 2.8% YoY. Although inflation is double that of the BOJ’s 2% target, BoJ Governor Kuroda continued to provide dovish comments, similar to those from the BoJ Monetary Policy meeting earlier this week. Kuroda said that “Our hope is that wages start to rise and that could make our 2% inflation target to be met in a stable and sustainable manner.” He also confirmed that the BoJ’s decision to widen the band the 10 year JGB was not a mistake and that monetary policy will continue to be accommodative. Kuroda will resign as BoJ Governor in April after attending his last BoJ Monetary Policy meeting in March. A replacement has not yet been named.

Everything you need to know about the Bank of Japan

Recall that on Wednesday the Bank of Japan left Monetary Policy unchanged. In addition, it left its Yield Curve Control unchanged after increasing the band around the 10 Year JGB from +/- 0.25% to +/- 0.50% at its December meeting. As a result, USD/JPY jumped 340 pips to 131.57. However, traders took the opportunity to sell US Dollars and buy Yen, pushing the pair back near unchanged on the day. Other JPY pairs followed a similar pattern. Notice that price struggled to remain below the 61.8% Fibonacci retracement level from the lows of 2022 to the highs of 2022 at 128.17. After today’s comments from Kuroda, the pair reversed and is heading back towards Wednesday’s intra-day high.

Source, Tradingview, Stone X

Trade USD/JPY now: Login or Open a new account!

• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore

On a shorter-term 240-minute timeframe, USD/JPY has made a channel of its own. Whereas price has broken above the channel on the daily timeframe, it still remains with the channel on the 240-minute timeframe. First resistance is at the highs of January 17^th at 131.57. Above there, price can hit the top trendline of the shorter-term channel at 132.18, then the highs from January 6^th at 134.77. However, if sellers decide to enter once again near the recent highs, USD/JPY could move lower. First support is at the low of January 15^th at 127.22. Below there, support crosses at the lows from May 24^th, 2022 at 126.36, then the bottom trendline of the shorter-term channel near 125.75.

Source: Tradingview, Stone X

Japan CPI for December reached its highest level since 1981 at 4% YoY. Despite this, BoJ Governor Kuroda continued with dovish comments regarding Monetary Policy. As a result, USD/JPY moved roughly 200 pips higher on Friday. Continue to monitor Yen pairs as they could remain volatile next week. Manage risk accordingly.

Learn more about forex trading opportunities.

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.