The 107 level has become quite significant of late as the USDJPY has gravitated towards it but also previously it has been well supported by this level. During the last three months, apart from one excursion below, the 107 level has supported the currency pair well pushing it back towards 108 and 109 repeatedly. 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.
As a stark reminder that any economic recovery from the coronavirus pandemic will be difficult, the Bank of Japan (BOJ) has forecast the nation’s economy will shrink by 4.7% in fiscal 2020. The forecast comes from the central bank's two-day policy board meeting, and is a median from all board members, which ranged from -4.5% to -5.7%. The 4.7% is a downgrade from the previous forecast from April’s meeting. "The pace of recovery is expected to be gradual," said BOJ Governor Haruhiko Kuroda, at a news conference. The BOJ's funding assistance to businesses will need to be kept in place for some time, he added. Despite the doom and gloom, Mr Kuroda did highlight some positive aspects of the economy, saying, "The number of bankruptcies has been limited so far, and unemployment has increased, but not as much as in other countries or after the Lehman crisis." In May, when Japan Prime Minister Shinzo Abe's government started to lift some coronavirus restrictions, other economic indicators have pointed to the economy bottoming out. However like in many countries, there remains significant concerns as to what will happen with the economy once government support starts to end. Despite the positives, economists have warned against complacency, indicating a possible jump in unemployment as the government support for businesses runs out.
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