BoJ lower for longer, USD/JPY faces resistance at 109.20 – Danske Bank

Analyst at Danske Bank Mathias Mogensen assessed the BoJ stance and the prospects for USD/JPY.

Key Quotes

“USD/JPY briefly bounced above 109 early this morning as the Bank of Japan (BoJ) increased its bond buying of 3-5 year bonds by JPY30bn to 330bn. It is the first time since July that the BoJ increases its bond buying”.

“While we should not put too much emphasis on the daily purchase operations, it is a clear signal that the BoJ want to stem recent upward pressure on yields and that BoJ’s main focus still is on the yield curve”.

“Correlation between USD/JPY and US fixed income market has broken down and in the near term, we expect weak USD sentiment, stretched short JPY positioning and continued uncertainty about the future BoJ leadership to weigh on the cross. Technically, support is seen at 108.28 and 108.09 and resistance is seen around 109.20”.