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USDJPY - Remains Around 107 as BOJ Set to do “whatever it can”



USDJPY - Remains Around 107 as BOJ Set to do whatever it can
In the last few days the USDJPY has eased back to the current key 107 level having surged through this level only a week ago, after it dropped to its lowest level in more than one month. During the last month, the 107 level has supported the currency pair well pushing it back towards 108 and 109, however in the last few weeks it has generally moved lower after meeting some resistance around 109 and this level remains relevant likely to continue to place downward pressure on price should it continue to move higher. For the best part of the last few weeks now, the USDJPY has traded back and forth between 107 and 109 after having dropped sharply from a one month high around 111.50 where it showed several strong doji candlesticks representing weakness in the up trend that took it to those levels.

Despite the breaks in the last two weeks, the 107 level is currently providing support and the 109 level is offering some resistance so it will be interesting to see how long the trading remains within this range and which side breaks first.

Through the middle of March, the USDJPY surged higher to regain lots of lost ground moving up from lows near 101 back up to the 111.50 range. The most significant move of late is when the USDJPY fell from a 12 month high above 112 down to a three year low near 101 in short time. During this time, the volatility remarkably increased by approximately 500%, however it has returned to normal levels over the last few weeks, with the range trading presently. Up until the high above 112, the USDJPY was content to trade in a wide range right around the 109 level, not showing any signs of moving too far away from it. This would have presented some opportunities for traders to trade the swings back and forth however for others, it was spending too much time trading sideways around 109.

The 109 level has played a significant role for an extended period now as even around the middle of last year, the 109 level was providing significant resistance and pushing prices lower on a regular basis. Even in the last few months of last year whenever the USDJPY traded above 109, it wasn’t long until it was pushed lower again. So it is again now, providing some resistance to the USDJPY as it trades below it.

The coronavirus pandemic rolls on unrelenting bringing economies around the world to a halt, as the International Monetary Fund (IMF) has warned that Asia will not enjoy any economic growth this year, for the first time in 60 years.  Central banks around the world have taken extreme measures to help including the Bank of Japan (BOJ) which expanded monetary stimulus nearly three weeks ago and commenced buying a limitless amount of bonds to keep borrowing costs low, as the government tries to spend its way out of the growing economic difficulties.  The BOJ Governor Haruhiko Kuroda said the central bank would do “whatever it can” to fight the mounting fallout from the coronavirus pandemic, warning that a collapse in global activity would restrict the economy.  However Mr Kuroda warned Japan’s economic outlook was “highly uncertain” and dependent on when the pandemic is contained, with risks tilted to the downside.  “Japan’s economy is in an increasingly severe state. The outlook will remain severe for the time being,” he said on Tuesday.  “What’s most important for us is to take steps to smoothen corporate financing and stabilise markets,” Kuroda added. “We will do whatever we can as a central bank, working closely with the government.”  Japan has been under a state of emergency until the end of May.

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