The BoJ today left its policy rate unchanged at -0.1% but changed the rates at which the central bank can buy Japanese Government debt (JGBs). The prior band of -0.25% to +0.25% around zero was widened to -0.50% to +0.50%, allowing JGB bond yields out to 10 years to rise. This move is seen as the first hawkish turn by the BoJ who have kept monetary policy ultra-loose in the past years.

Inflationary pressures in Japan have been building over the last year with last month’s October CPI reading of 3.7% y/y the highest level seen in four decades. The November report is released this Thursday at 23:30 GMT and is expected to show a further rise in domestic price pressures.

Today’s sharp move lower in USD/JPY has changed the technical picture bearish with the pair now back to levels last seen four months ago. The pair has broken below the 200-day moving average with conviction and this indicator will now act as resistance. The pair have also printed a new lower low, keeping in play a series of lower highs and lower lows seen from the October 151.94 high trade. Initial resistance is seen at 133.63 while support at 131.58 may come under pressure soon. A break below here sees 130.40 as the next target.

USD/JPY Daily Price Chart

(Click on image to enlarge)

Chart via TradingView
 

Retail Traders Build USD/JPY Net-Longs

Retail trader data show 51.93% of traders are net-long with the ratio of traders long to short at 1.08 to 1. The number of traders net-long is 9.72% higher than yesterday and 19.32% higher than last week, while the number of traders net-short is 14.97% lower than yesterday and 24.56% lower than last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests that USD/JPY prices may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger USD/JPY-bearish contrarian trading bias.

What is your view on the USD/JPY – bullish or bearish?

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