USD/JPY: forget about Japan
The Bank of Japan may stay on hold until autumn.
In line with expectations Japanese central bank didn’t announce any new monetary stimulus measures at its May 22 meeting. One of the BOJ members, as usual, voted to cut quantitative easing program (QE). Governor Kuroda sounded a bit more optimistic about Japanese economy during the press conference. According to the data released during the past week, the nation’s economic growth accelerated from 0.4% to 0.6% in Q1.
As a result, further quantitative easing in Japan in the coming months is unlikely. However, the Bank of Japan’s pledge to reach 2% inflation target in 2016 still looks unrealistic. As a result, we don’t rule out the possibility of more easing later this year. For now, however, USD/JPY will lack drivers up from the Bank of Japan, so its ability to get higher will depend on how hawkish the US Federal Reserve is.
Next week pay attention to the release of the Bank of Japan’s meeting minutes on Wednesday and a block of important Japanese data on Friday. Break above March highs has turned the picture bullish. Technically USD/JPY has resistance in the 121.85/122.00 area ahead of 123.00 and 124.00 and support at 120.00 and 119.30.