- The Bank of Japan announced it would review its yield curve control policy.
- The BoJ made an unexpected adjustment to the trading band for the 10-year government bond yield.
- Investors are awaiting BOJ Governor Haruhiko Kuroda’s press conference later in the day.
The USD/JPY price analysis turns strongly bearish as the Bank of Japan surprises the market with a shift in policy. On Tuesday, the Bank of Japan announced it would review its yield curve control policy and made an unexpected adjustment to the trading band for the 10-year government bond yield, sending the yen to a four-month high against the dollar.
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Broad policy settings were left alone, with short-term JGB yields set at -0.1% and the 10-year yield hovering around zero, but the range of acceptable long-term yields was increased from 25 basis points to 50 basis points on either side of that.
The dollar dropped to 132.68 yen, last seen in mid-August, a 3.1% decline.
Now, all eyes will be on BOJ Governor Haruhiko Kuroda’s press conference later in the day for more clues about a change in direction from the ultra-easy policy. Most BOJ observers anticipated no changes until the end of March when his 10-year term expires.
The U.S. dollar index declined, falling 0.21% to 104.42 and moving back to the midpoint of its trading range this month, from 103.44 to 105.90. The index compares the dollar’s value to the yen and five other important peers, such as the euro and pound.
Before the BOJ decision, it had been edging closer to the top of that range as investors took their time absorbing the Federal Reserve’s message of longer-term higher interest rates.
USD/JPY key events today
Investors expect a building permits report for November from the United States. They expect the value to drop from the previous 1.512M to 1.485M.
USD/JPY technical price analysis: Explosive move goes for a new low
USD/JPY has made a massive move to the downside, showing bears are quite strong. This has sent the price far below the 30-SMA and the RSI to the oversold region. The price did not pause at any support level and has just broken below 134.00.
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Since the RSI is in the oversold region, bulls might come in to retest the recently broken support level. If this level holds as resistance, we might see another sharp move lower. The bearish bias will remain as long as the price stays below the 30-SMA.
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Saqib Iqbal
