Japanese Yen signals the end of the Bank of Japan’s dovish stance. The intervention is still a fluctuating threat to the USD/JPY in the future. All eyes focus on the BoJ’s and the Fed’s preferred inflation gauge.

BoJ’s Balancing Act

After the Bank of Japan maintained all of the customary policy settings unchanged in October, the Japanese Yen marked time. The objective for the 10-year government bond yield and the policy balance rate were now, respectively, -0.1% and 0.0%.

Given the government’s attempts to engage in foreign exchange markets in order to support the currency, traders were likely more interested in hearing about the currency itself.

The BoJ didn’t really contribute anything in that regard. They were advised to monitor FX and its effects on the economy. It’s becoming more intriguing that the BoJ raised its core CPI projections for the fiscal year 2022 from 2.3% to 2.9%.

Local inflation data for September shocked higher last week. While this was going on, the government unveiled a $200 billion economic package to combat inflation.

USD/JPY BoJ Reaction

In spite of this and small increased adjustments to the inflation estimates for the upcoming fiscal years 2023 and 2024, the central bank stated that it will “contribute additional easing without hesitation if needed.”

As a result, in the industrialized world, the BoJ continues to be a significant outlier. Fundamentally, the strong dovish stance of the central bank will probably continue to work against the Japanese Yen.

At 6:30 GMT, Governor Haruhiko Kuroda will hold a press conference. Japan’s Finance Ministry made its first intervention in decades to support the Yen following the most recent BoJ rate decision. 

Trading should therefore be done here with some caution. Another such performance would cause the USD/JPY to oscillate wildly.

The preferred inflation indicator of the Federal Reserve will eventually come into focus. PCE Core is anticipated to hit the wires at 5.2% y/y at 12:30 GMT, up from 4.9% before. 

After a few days of declines, another strong print might advance hawkish Fed policy views and push Treasury rates back up. That will probably also benefit USD/JPY to some extent.

Japanese Yen Technical Analysis

At 145.903, USD/JPY is stagnant slightly above the high from September 22nd. It’s functioning as fresh support. Recent price closures below the 20-day Simple Moving Average have bearish implications for the near term. But there hasn’t really been any follow-through.

The 50-day SMA could provide as important support below, keeping the overall upward emphasis. The 61.8% Fibonacci extension at 149.937 serves as a significant barrier.

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