Yen Slides as BoJ Sees Little Need to Tweak YCC in June

USD/JPY Rates, Charts and Analysis:

Most read: Japanese Yen price action settings: EUR/JPY, USD/JPY, AUD/JPY

The yen faced selling pressure after the European opening this morning as reports circulated that the Bank of Japan (BoJ) still sees the need for continued monetary stimulus. As I discussed in my article on the JPY earlier this week, market participants seem to have failed to buy into the position of the Bank of Japan which continues to support the JPY. Will this change after today’s comments?

Bank of Japan and policy implications moving forward

The potential shift in policy has been a key point for market participants since the announcement of a new Bank of Japan governor earlier this year. The recent strength of the yen is due in part to market participants still hoping for a pivot in politics despite Governor Ueda’s continued rhetoric. Yesterday saw yen demand in European trade, as GDP data shattered estimates likely to reignite hope for a pivot in politics while failure in initial jobless claims from the US sent USDJPY further lower. Japanese, recording a daily low around 138.80.

This morning brought fresh reports that the BoJ sees little need to adjust the June Yield Curve Control (YCC) while still seeing a need to continue monetary stimulus. The central bank also talked about its rate target which it believes is still out of sight, as the bank also expected inflation to remain flat going forward. The initial reaction saw the yen fall while Japanese bond futures rose with USD/JPY approaching 140.00. The Bank of Japan (BoJ) is conducting a full review of its monetary policy; However, it is estimated that the results will only be available within the next 12-18 months. Will this finally put an end to the hopes of the Axis?

The US data had an interesting effect on the markets this week, adding to the volatility more than I expected. We have seen a constant shift between USD strength and weakness as bulls and bears flock to positions ahead of key events in the coming weeks. To wrap up the week today, the US session will be data-free in terms of data releases as focus will shift to next week’s CPI and Fed decision.

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Final thoughts and technical outlook

USD/JPY is still bullish in structure without daily closing below 138.72 however I am not convinced that we are ready to print higher highs yet. It looks like USDJPY might need a catalyst for a convincing breakout in either direction as the bulls continue to fail to gain acceptance above the 140.00 psychological handle.

US dollar / Japanese yen Daily chart – June 9, 2023

Source: TradingView, chart created by Zen Fuda

From a daily perspective, looking at the 4-hour chart below, the USD/JPY faces immediate resistance at 139.80 and 140.20, respectively. The price is currently trading within a wedge pattern while we have been printing lower highs and lower lows since June 5th. However, this was before today’s comments with the question now being whether the comments can inspire a wedge break and acceptance above the 140.00 psychological mark.

Alternatively, a failure to break above the 140.00 handle could trigger a renewed bearish impulse as buyers may look to book profits ahead of the weekend. This could facilitate a renewed push to the downside with support at 138.80 handle before focus turns to 137.90 (March swing high).

American dollar/JPY four hour chart – June 9, 2023

Source: TradingView, chart created by Zen Fuda

Written by: Zain Fouda, Markets Writer DailyFX.com

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