Prior to the support at 104, the USDJPY had eased back over the previous few weeks from a three week high above 106. The other current significant level is 105 although this was recently broken through in the last few weeks, although it could be expected to offer some resistance again should the USDJPY rally again off support at 104. The USDJPY has enjoyed support from 105 on and off for the last four months.
Up until one month ago, for the best part of the previous four months, the USDJPY has generally traded between 105 and 107, and it has rallied up from support around the key 105 level on several occasions, however this range has now extended down to 104 which had been supporting it well up until the breaks in the last few weeks. Throughout August, the USDJPY also made multiple attempts to break through the other key level at 107 however it has met stiff resistance on every occasion forcing it lower.
After trading in a very narrow range right around the key 107 level in late July, the USDJPY then went on a rollercoaster ride as it fell sharply to a then five month low near 104 before rallying strongly back to resistance at 107. In late June the USDJPY moved through the key 107 level to a three week high before slowly easing back towards 107 where it is found some support.
In its attempts to support the Japanese economy amid the coronavirus pandemic, the Bank of Japan (BOJ) increased its stock and exchange-traded fund (ETF) purchases this year. When the pandemic first hit, the BOJ announced it would increase its purchases to 12 trillion yen, which is double its normal target. The central bank has now become the nation’s largest owner of stocks, with the total value of its holdings climbing well above $400 billion, however it hasn’t happened without some critics. Some market participants have suggested that the BOJ “could face more scrutiny” over whether it needs to continue to buy Japanese equities when prices are already elevated. BOJ Governor Kuroda has defended the move by repeatedly saying that the ETF and stock purchases are needed as part of monetary stimulus to reach the BOJ’s inflation target. Significant stock and ETF purchases by the BOJ to support the market this year has increased it Japanese equity portfolio to 45.1 trillion yen ($434 billion) in November, which is now those of the Government Pension Investment Fund.
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