Following the statement made by the head of the Bank of Japan Haruhiko Kuroda in the parliament on Wednesday, the Japanese Yen has grown against the USD. Kuroda said that the real effective exchange rate of the Yen is rather low and the further decline is unlikely. The statement made by Kuroda concerned investors, as weak Yen is good for export-oriented economy and Japanese stocks, although not as much for the consumer. However, in order to support the economy, the Bank of Japan will continue its quantitative easing program until the 2% inflation target is reached.
The main factor contributing to the weakening of the Yen in the USD/JPY pair is the difference in interest rates in the US and Japan. The factor contributing to the strengthening of the Yen is its status of a safe-haven currency.
News in the US is released today between 15:30 till 17:30 (GMT+3). The data is expected to be positive which would support the USD. On Friday at 07:30 (GMT+3) Japanese industrial production data is published. In the medium term, the JPY remains weak and at the next Bank of Japan meeting on 18-19 June the monetary policy is likely to be left unchanged.
Support and resistance
Any decline in the pair USD/JPY shall be viewed as a correction for opening long positions and will be restricted by resistance levels at 122.40 and 122.00. On the daily chart, indicators are still in the zone of corrective short positions. On the four-hour chart, the pair bounced off from the support level at 122.40 (Fibonacci 50%). Across this level also goes the bottom line of the ascending channel (green color), as well as the moving average lines of ЕМА200 and ЕМА144. The indicators OsMA and Stochastic give buy signals.
Support levels: 122.20, 122.40, 122.70 and 123.15.
Resistance levels: 124.10, 124.50 and 124.80.
It is advised to open long positions at the current price and from the levels of 122.20, 122.40, 122.70 and 123.15 with targets at 124.10, 124.80 and 125.65.
Short positions can be opened after breakout of the level 121.60 with targets at 120.80, 120.20 and 119.15.