Japanese Market Commentary – Tuesday, October 31

Small Tweaks From BOJThe Japanese Yen hit its lowest level against EUR today for the first time since 2008. The fresh rally in EURJPY comes in response to the latest BOJ meeting overnight. The bank once again held headline policy unchanged, reaffirming its commitment to easing, despite making a further adjustment to its YCC program. The bank announced the removal of 1% as the upper ceiling on its YCC program, though it will keep 1% as a reference level. Additionally, the bank announced an end to its fixed daily bond purchases. Both moves give the bank greater freedom but have increased uncertainty for JPY traders. Downside Risks for JPYOutside of these operational tweaks, there were further changes in the BOJ’s latest set of forecasts. The inflation forecast for 2024 was revised higher to 2.8% from the prior 2.5% and the 2025 CPI forecast was raised to 1.7% from 1.6% prior. The forecasts suggest the bank feels the current pickup in inflation will prove transitory and argues against any expectations of a forthcoming shift in rates with the bank preferring to use its YCC program to manage financial conditions. As such, JPY looks vulnerable to further weakness near-term despite ongoing intervention speculation. Technical ViewsEURJPY The pair is now testing above the 160 level for the first time since 2008 and, with momentum studies climbing, the focus is on a continuation higher near-term. The next hurdle for bulls will be a further retest of the underside of the broken bull channel, ahead of the next structural resistance at the 162.29 level. To the downside, 155.40 remains key support. More By This Author:Crude Oil Commentary – Monday, October 30US Dollar Commentary – Monday, October 30Eurozone Commentary- Friday, October 27