Currency Analyst since 2010

USDJPY: outlook for August 1-7

The Bank of Japan eased monetary policy On Friday. Still, the market got disappointed, because the regulator didn’t increase purchases of Japanese government bonds or take negative interest rates even lower. What the central bank did was double purchases of exchange-traded funds (ETF) from 3 to 6 trillion yen, but many thought that the BOJ is running out the policy tools. Governor Kuroda did leave room for possible action in future as he announced that the regulator will do a comprehensive assessment of monetary stimulus effects at the next meeting. However, during the press conference Kuroda didn’t confirm that such an assessment would lead to major shifts in policy.

With such position taken by the Bank of Japan, Japanese yen is going to remain strong. USD/JPY reversed down from the 200-week MA and the downtrend resistance line in the 106.70/107.50 area. The pair is vulnerable for decline to 100.70/100.40 support. Further support is at 98.80. Resistance is at 103.60, 104.05 and 105.20.   

Japanese economic calendar contains only data releases of low importance, such as final manufacturing PMI, consumer confidence and average cash earnings. Pay attention to China’s PMI on Wednesday as it may have an impact on the market’s risk sentiment and, consequently, demand for the yen. The US nonfarm payrolls will make trading volatile on Friday. 

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