- BOJ Policy Plans
- Japan Economy Concerns
- U.S Economic data
USD/JPY pair continues to trade in a tight trading range in the aftermath of the Bank of Japan opting to keep rates unchanged and retaining the yield curve control program. The pair has gone back and forth on finding support above the ¥107.00 level. The ¥107.50 level has since emerged as a key resistance level, curtailing upward movements.
BOJ opting to keep interest rates steady comes at the backdrop of a strengthening dollar that has bounced back on risk aversion concerns. A strengthened dollar has helped catapult the pair from one-month lows as the Yen remains under pressure.
In addition to keeping interest rates unchanged at -0.10%, the BOJ has opted to increase the special coronavirus program to JPY110 trillion from JPY75 trillion. The increase is part of the central bank push to revitalize the economy, which has felt the full force of the coronavirus pandemic.
The Japanese economy remains in a severe situation and likely to remain so as the second wave of infections continues to cause havoc. Short and long term lending rates are likely to remain at current record lows as the policymakers continue to work round the clock to stimulate the economy.
Concerns about the health of the Japanese economy continue to take a toll on the Japanese Yen sentiments fueling the Dollar’s weakness. The Greenback has continued to strengthen across the board as a safe-haven amidst the looming second wave coronavirus infections.
The dollar has also received support on the Federal Reserve doing all it can to avert economic crisis and market crash at the back of the COVID-19 pandemic. The FED is fresh from announcing a new program to buy corporate debt with a maturity of five years or less. The Donald Trump administration is also set to announce a $1 trillion infrastructure spending spree.
Looking ahead, traders await Retail sales data in the U.S expected to have some impact on the Dollar. Similarly, when the FED Chair, Jerome Powel, testifies the market could experience some volatility that could sway USD/JPY movements.