USD/JPY keeps the red but holds above mid-108.00s post- Kuroda
- The pos-FOMC intraday USD bullish spike fizzled out rather quickly.
- BoJ policy update did little to impress traders or provide any impetus.
The USD/JPY pair traded with a mild negative bias near the lower end of its weekly trading range, albeit has still managed to hold above a key pivotal point around mid-108.00s.
The pair witnessed some follow-through selling on Thursday and retreated farther from the overnight swing high to near three-month tops, touched in reaction to a hawkish cut by the Fed. The pair surged past the very important 200-day SMA, levels further beyond the 109.00 handle after the Fed signalled a pause in the current rate-cut cycle.
Weighed down by the post-FOMC USD weakness
Following a two-day meeting on Wednesday, the Fed delivered a 25 bps rate cut for the third time this year. In the accompanying policy statement, the Fed dropped its previous reference to act as appropriate to sustain the economic expansion – considered an indication for future cuts – and provided a goodish lift to the US Dollar.
The positive momentum, however, fizzled out rather quickly after the Fed Chair Jerome Powell, in the post-meeting press conference, said that the Fed will need to see a significant move up in inflation before considering raising interest rates. The pair finally settled with modest losses and remained depressed for the third consecutive session on Thursday.
Meanwhile, the downside remained limited after the Bank of Japan (BoJ) held short-term interest rate target at -0.10% and 10-year Japanese Government Bond (JGB) yield target around zero. The Japanese central bank also offered more clarity on its forward guidance and indicated that short/long-term rates are likely to remain at current or lower levels.
The dovish outlook was further reaffirmed by the BoJ Governor Kuroda, saying that our forward guidance suggests that we conduct policy that leans towards easing and there are various options available for further easing, which kept the JPY bulls on the defensive and might continue to help limit any deeper losses, at least for the time being.
It will now be interesting to see if the pair is able to attract any buying interest at lower levels or remained depressed ahead of Friday's release of the closely watched US monthly jobs report. In the meantime, Thursday's second-tier US economic releases might provide some short-term impetus later during the early North-American session.
Technical levels to watch