It has also met stiff resistance at 109, despite the recent break. For the best part of the last three months, the USDJPY has traded back and forth between 107 and 109 after having dropped sharply from a one month high around 111.50, and now it finds itself back around the key 107 level.
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. 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.
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.
Like many central banks around the world, the Bank of Japan (BOJ) have been attempting to counter the severe impact of the coronavirus impact on the Japan economy.In response to the situation, the BOJ have declared a lengthy state of emergency which will likely be discussed at their next bank meeting mid-July, when they state their next economic forecasts. It is widely expected that the BOJ will lower its economic forecasts again at that meeting, as severe impact of the pandemic on the domestic and global economies becomes clearer. Unless the yen strengthens noticeably or markets become a little shaky, most do not expect the central bank to take any further easing action.It appears their current focus is funding of companies and financial markets. At their June meeting, the BOJ did indicate that it plans on watching to see what impact their loan programs and other measures will have on the economy. The International Monetary Fund believes Japan’s economy contracting 5.8% this year due to COVID-19, which is larger than they originally expected and larger than their contraction from the global financial crisis.
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