The Japanese yen fell more than 1% against the dollar after the Bank of Japan (BOJ) kept its ultra-loose monetary policy as expected and, more surprisingly, showed no sign of change, while the dollar pulled back from recent lows.
USDJPY jumped 1.22%, its biggest daily gain since late October, to 144.50.
The Bank of Japan kept short-term interest rates at -0.1 percent and left the yield curve unchanged. After a Dec. 11 Bloomberg report suggested a rate hike was unlikely at the last BoJ meeting in 2023, most markets eased expectations of a rate hike, but some markets were clearly still holding out as the yen fell shortly after the announcement.
Governor Kazuo Ueda mentioned that there is still a lot of uncertainty in the economy, but officials expected modest, above-trend growth. Japan’s economy is expected to rebound after a 0.7 percent contraction in the third quarter (QoQ) as oil prices fell sharply in the fourth quarter of the year for the net oil importer.
Inflation and wage growth remain question marks as the bank looks for convincing evidence that both are likely to continue to rise.
Technical Outlook – Japanese Yen:
The USDJPY pair witnessed speculative jump and rose above 1.22% today. Since the start of the week, the pair has recovered from a four-month low of 142.030 and recently touched a high of 144.694.
The formation of a three white soldier candlestick pattern indicates an uptrend for the pair. Moreover, according to the Elliott wave plotted on the chart, after the impulse wave 1-5 on November 13, 2023. Pair trade under ABC corrective wave. And this completed the late A ABC correction.
Now wait for a pair of leg B, which would again be 148-150 levels. Thus, the near-term trend can be positive and USDJPY can rise by 3-4%.
On the downside, crucial support can be seen at 140.90 and only a break below, the pair could correct to 137.50-135.00.
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