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USDJPY - Gravitates to Key 111 Level Again



USDJPY - Gravitates to Key 111 Level Again
The USDJPY has enjoyed a healthy rally in the last week or so moving from a two month low below 110 back up to a three week high approaching 112 in the last couple of days. It has however since been sold off and returned to the current key level of 111 which has been a key level for at least the last 12 months. In more recent times the USDJPY has enjoyed support and endured resistance from this level so it is no surprise that yet again the currency pair has returned to this level. It bounced strongly off the 111 level around a month ago reaching a one week high above 112 before beginning the recent decline. Towards the end of July the USDJPY reversed strongly from a 2018 high above 113 and fell strongly to the 111 level where it enjoyed solid support again.

Towards the end of May the USDJPY reached a four month high above 111 before falling sharply in the week after and after forming a few solid reversal candlesticks around the recent peak. Since the end of March, the USDJPY had also rallied well from 15 month lows below 105 to return back to the key level of 107.50 and beyond. The 107.50 level supported the USDJPY late last year before providing stiff resistance on several occasions over the last few months. The 107.50 level blocked the USDJPY from moving higher for more than a week in early April, including another strong doji candlestick indicating rejection at higher prices. A week later the level was finally broken.

After trading within a range roughly between 108 and 114 for most of last year, the USDJPY started off this year moving down towards the bottom of the range again, however then continued lower. The shorter term and medium term trends have since reversed since April and are confirming how strongly the USDJPY has reversed to return to the 111 level.

Bank of Japan (BOJ) board member Hitoshi Suzuki believes one of the reasons that Japan’s inflation is so tame is Japanese households’ lingering worries about the country’s rapidly ageing and shrinking population.A former commercial banker who joined the BOJ board in July 2017, Mr Suzuki said that central bankers need to pay more attention to how the bond market is affected by its ultra-loose monetary policy, which is likely to be in place for a long time.In a speech delivered to business leaders in Okinawa, Mr Suzuki said, “It is taking time for prices to rise, so monetary easing is expected to continue in the future.With this in mind, we need to pay even more attention to how monetary policy affects the bond market and other financial markets.”Last month when the central bank changed policy, the BOJ Governor Haruhiko Kuroda said that the central bank will double the range that 10-year government bond yields move in to 0.2%.However, Suzuki said such a move did not indicate that the BOJ wanted to raise rates.

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This post was written by Graeme Watkins

CEO Valutrades Limited, Graeme Watkins is an FX and CFD market veteran with more than 10 years experience. Key roles include management, senior systems and controls, sales, project management and operations. Graeme has help significant roles for both brokerages and technology platforms.