The Japanese yen staged a recovery after the Bank of Japan’s policy meeting Thursday, where the BOJ announced it would expand its asset purchase plan and review its long-term price stability goal. Dollar-yen briefly spiked to a Y84.40 high before reversing direction and erasing all of its morning gains to drop to a low of Y83.99 after the BOJ announcement. Dollar-yen has been firm in the last few sessions on expectations that the BOJ may announce new asset purchases and increase its asset purchase plan from Y91 trillion to Y100 trillion. Today, the BOJ said it would raise the size of its asset buying fund to Y101 trillion from Y91 trillion. It also said it would review its longer-term price stability target, currently set at 1%, at its next meeting. The description of the inflation target itself could more conceivably be changed from the zero to 2% long term and a 1% goal for the time being to something more precise nearer 2%. BOJ Governor, Shirakawa could be willing to concede a higher target, as long as its not his job alone to make it happen and he can still blame government policy and structural impediments rather than monetary policy. Dollar-yen was last at Y84.15 compared with a U.S. close of Y84.41. The pair will need to take out earlier highs near Y84.61 and then plow through offers in the Y84.75/80 zone (April 12 2011 highs) for upward momentum to mount toward the 2011 highs around Y85.53 seen April 7. Traders noted offers on the approach to Y85.00 (option barrier) and heavy offers at Y85.50 (barrier) with stops on a clear-cut break above that zone. Euro-yen meanwhile was at Y111.28 soon after the BOJ announcement, in the middle of a Y110.85 to Y111.29 range, and down slightly from Y111.65 at the U.S. close overnight. Еech analysts expect initial resistance for the cross to come in at Y112.17, the 61.8% of Y123.33 to Y94.12, a level which bulls will look to test, while support is seen at Y109.93/98, the Dec. 17 low and Dec. 14 high.
EasyForexNews Research Team