Tuesday’s Governor Hauhiko Kuroda statement is pushing the Yen up during the opening of today’s London session, against the main G10 currencies, with the majority of the JPY crosses trading down at the moment
Following the Governor, the Japanese government’s negative rates policy implemented in January, won’t be an obstacle for the purchase of government bonds from the BOJ and the consequent JGBs purchase won’t change significantly.
The BOJ move at the beginning of 2016 have bring to -0,1% the rate of some excess reserves for the financial institutions with the goal not only to intensify the easing process but also to push down the entire yield curve (with the yield of the 10y JGB decreased to minimum of -0,135% the 18th of March).
Kuroda added “The negative interest rate policy isn’t impeding BOJ purchases of Japanese government bonds and it will not make it difficult for the BOJ to buy bonds from now on.” The Country’s situation explained by the Governor see export and production falling on the back of a general slowdown of the EM economies, while firm investment plans remain on hold for the rest of the 2016. This morning data, moreover, have seen the March Composite and Services PMI index falling down respectively to 49.9 (from 51.0) and 50.0 (from the previous 51.2).
A very interesting data regards the purchase of foreign assets by the Japanese investors: historically this data decreases going to the end of the financial year (which closes the 1st of April). This trend is completely the opposite in 2016 and now the foreign asset purchase (following the MOF weekly report) is at ¥12.02 tr for the Jan-Mar quarter. A very close result to the 2010 one, which is the historical record.
Talking about technical analysis we can see that, during the beginning of the European session, the USD/JPY cross have broken the yearly minimum of 110.65 trading at the moment at 110,5590 (-0,70%). The Yen bullish movement is also a consequence of the big drop of the Japanese Equity, which is now trading very bearish with the Nikkei 225 at -2,42%.
During the session we expect bids for the Japanese currency, on the wake of the poor German data combined with the general risk-off sentiment on the European markets which could feed the demand of safe-haven currencies, like Yen.
The immediate resistance for the USD/JPY cross is seen at 111.26, while on the opposite side, che first significant support could be find at 110,00.