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Yen Gains Traction as BOJ Keeps Assets Purchases Unchanged

David Becker
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Yen Gains Traction as BOJ Keeps Assets Purchases Unchanged

The Yen has jumped to a 3-month high versus the greenback slicing through support levels on the USD/JPY. There appear to be two main drivers for the yen’s strength. First, the softness in US Treasury yields which is driving the yield differential in favor of the yen and second, BOJ’s Kuroda is not giving any quarter to speculation that the BOJ is seriously considering boosting its asset purchase scheme any time soon.

Prior to the Bank of Japan meeting, surveys showed as much as 70% expected new easing measures by the end of July. The BOJ left policy on hold today, of course, and upgraded its assessment of capital expenditures. Kuroda also repeated his argument that the labor market is improving in Japan.

Separately, Japan reported a smaller trade deficit, boosted by a 5.1% rise in exports and a 3.4% rise in imports. The shortfall of 809 billion yen was still about a third larger than the consensus forecast, even though it represents almost an 8% improvement from a year ago. Japanese officials had hoped that re-starting few nuclear plants this year would also take some pressure off the energy imports.

The USDJPY moved through the 200-day moving average for the first time since late 2013. Resistance is seen near the 10-day moving average at 101.63. Momentum on the currency pair is negative as the MACD (moving average convergence divergence) generated a sell signal. This occurs when the spread (the 12-day moving average minus the 26-day moving average) crosses below the 9-day moving average of the spread. The index moved from positive to negative territory confirming the sell signal. The RSI moved lower with price action reflecting accelerating negative momentum while printing near 34, which is on the lower end of the neutral range.

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