The Japanese yen has shown limited movement in recent weeks, with USD/JPY  content to hover close to the 107 mark. The pair didn’t show much interest in the Bank of Japan’s rate decision late Tuesday.

BoJ says GDP, inflation to contract

As expected, on Tuesday, the Bank of Japan maintained its monetary policy, which has been ultra-accommodative. BoJ Governor Haruhiko Kuroda didn’t mince words at a follow-up press conference, warning that “the Japanese economy has been in an extremely severe situation”. The bank left short-term rates at -0.1% and long-term rates at around zero percent. Economic conditions remain grim in Japan, as the global economy has faced a meltdown in the wake of the Corvid-19 pandemic. Japan has been particularly vulnerable, with its economy highly dependent on its export sector. In its quarterly outlook report, the bank said that it expected GDP to contract by 4.7% and CPI to fall by 0.5% in fiscal 2020 through March 2021. However, the bank added that it expects the economy to rebound in fiscal 2021 with a gain of 3.3%.

The BoJ has had little in the way of monetary ammunition for quite some time, and as such as stubbornly clung to its ultra-easy accommodative policy. Governor Kuroda stated in a follow-up press conference that the BoJ could cut rates, but the vote at the meeting was 8-1 to stand pat, with only one member voting to lower rates. It appears that we can expect more of the same from the Bank of Japan, which means that the USD/JPY could stay close to the 107 level for the near future.

USD/JPY Fundamentals

Tuesday (July 14)

  • 22:57 BoJ Outlook Report
  • 22:57 BoJ Monetary Policy Statement
  • 22:57 BoJ Policy Rate. Estimate -0.10%. Actual -0.10%

Wednesday (July 15)

  • 2:30 BOJ Press Conference
  • All Day OPEC-JMMC Meetings
  • 8:30 US Empire State Manufacturing Index. Estimate 10.0
  • 9:15 US Industrial Production. Estimate 4.5%
  • 10:30 US Crude Oil Inventories. Estimate -1.3M

Thursday (July 16)

  • 8:30 US Core Retail Sales. Estimate 5.0%
  • 8:30 US Retail Sales. Estimate 5.0%
  • 8:30 Unemployment Claims. 1250K

*All release times are EDT

*Key events are in bold

USD/JPY Technical

USD/JPY is currently trading at 106.75, down 0.45% on the day. The pair headed lower in the Asian session and this trend has continued in European trade.

  • 107.41 is the next line of resistance. Above, there is resistance at 107.51.
  • The 10-day MA is slightly above the pair, at 107.35
  • USD/JPY broke below support at 107.10 in the Asian session. There is support at 106.95, followed by support at 106.79.