As expected the Bank of Japan decided to keep rates steady Friday with expectations suggesting this stance will continue for quiet some time. That said BoJ Governor Kazuo Ueda has announced it will be trimming it purchase of government bonds over the next two years, not enough of an excuse to see the Yen rally but underscoring the policy direction of normalization, i,.e. tigherning policy. For now we seriously have to consider implications for carry trades.
Resistance
- 158.440 – Intraday Consolidation High
- 158.255 – High for June
- 157.723 – High from 5/29
Support
- 157.408 – Intraday Consolidation Resistance
- 156.754 – 20D Moving Average
- 156.462 – Intraday Consolidation Resistance
Given the failure to close above the breakout point and the long wick in the daily charts risk at this point is for USDJPY to ease further. While we do continue to advocate the carry trade now is not the right time for new longs. Consider intraday shorts on a drop below 157.408 looking to ease towards the 20D moving average at 156.754. At that point we will asses on the viability of going long to reestablish carry trades. It will be sometime before we can look for sustained Yen strengthening.
