USD/JPY pays attention on Bank of Japan’s (BOJ) monetary policy announcements, stays bullish moment on pair among early Friday. The reason could be traced to the US dollar’s sustained strength for its best weekly gain in about a month, supported by buying on investor worries about quicker U.S. interest rate increases and by rising virus infections, while a hot inflation reading lifted US Dollar and already expected move by the Japanese central bank.
The BOJ has kept the key policy rate at -10 basis points (bps) as it abides by its pledge to buy J-REITS up to JPY180 billion at an annual pace during the July monetary policy meeting. In doing so, the Japanese central bank told Reuters that “Japan’s economy is in a severe state, but is being taken as a trend.
On the other hand, a survey by credit-research firm Tokyo Shoko Research found that 34.2% of small and medium-sized enterprises with a capital of less than ¥100 million have a higher debt of their own, more than 15.4% of large firms. According to a survey conducted by credit-research firm Tokyo Shoko Research, 34.2% of small and medium-sized enterprises with a capital of less than ¥100 million have a higher debt of their own, more than 15.4% of large firms. Although sales of SMEs declined significantly, the number of corporate bankruptcies (for loans of 10 million or more) decreased by 22.2% year-on-year during the January-May period of 2021 to a total of 2,503 bankruptcies. However, business performance has not yet recovered, especially in the restaurant sector, resulting in excessive debt.
The rise of the corona virus has been a major catalyst in the wake of the market’s recent rush for risk protection. The Northern Hemisphere recently merged and, unfortunately, the League of Asia-Pacific region witnessed a multi-day high epidemic and rapid spread of the Govt variant. The UK recorded the highest number of daily cases since the previous day in January, and Tokyo’s epidemics were the highest in six months. Also, recalling the Los Angeles mask order extends Australia’s local lock downs.
As the BOJ met market expectations, USD/JPY traders will pay close attention to Governor Haruhiko Kuroda’s comments for immediate direction. Ahead on Friday, traders are looking to U.S. retail sales data and consumer confidence for any reading on inflation and the strength of the recovery.
USD/JPY 4 Hour Chart:
Support: 109.67 (S1), 109.50 (S2), 109.29 (S3).
Resistance: 110.04 (R1), 110.25 (R2), 110.41 (R3).
Amidst this above catalysts yen is on downtrend and also another reason could be US dollar strength. We expect a bullish trend for USD/JPY.
