USDJPY yen
The USDJPY is little changed today as traders react to the BOJ interest rate decision. The pair is trading at 107.25, which is a few pips above the intraday low of 107.200.
At the conclusion of the two-day meeting started yesterday, the BOJ did what most people were expecting. The bank left interest rate unchanged at -0.10%, where it has been for the past few years. It also pledged to continue supporting the economy by conducting a yield curve control. This is a simple process in which the bank buys as much government bonds as possible to ensure that the yield of the ten-year remains at 0%.
The most important statement today was the bank’s views of the economy. The members now expect that the economy will contract by 4.7% this year. This number is the median estimate of all the 9 members of the committee. Individually, their forecast for the year ranges between -4.5% to -5.7%.
They are also optimistic that the economy will recover by 3.3% in 2021 and 1.5% in the following year. Also, the bank expects that the core CPI will fall to 0.5% this year before rebounding to 0.3% and 0.7% in the next two years. These numbers mean that the BOJ will have trouble raising rates since its target inflation rate is at 2%.
The USD/JPY is trading at 107.25, which is along the 100-day and 50-day exponential moving averages on the four-hour chart. The price is also between the 23.6% and 38.2% Fibonacci retracement level. The pair also seems to have formed a bullish flag as shown below. This means that the price may resume the upward trend as bulls target the next 38.2% retracement at 107.52.
On the flip side, a break below the lower side of the flag at 107.00 will invalidate this prediction. It will send a signal that there are more sellers in the market, who will be keen to push the price lower.