- BOJ still views inflation as transitory.
- The yen plummeted to around 131 against the U.S dollar.
- A reversal setup might be impending.
Swift declines of the Japanese yen (over the past few years) triggered some of the move lucrative actions witnessed in the Forex marketplace in the latest history. The Ye melted as it lost value against all peers besides the U.S dollar.
Taking the United States dollar, the Japanese yen declined to beyond 131 before reclaiming some grounds within the past couple of days. What about the yen performance throughout 2022? Moreover, is the BOJ right maintaining fiscal policy smoothly?
BOJ Still Views Inflation as Transitory
The primary reason behind JPY’s decline is the monetary policy of the Bank of Japan. The central bank keeps the financial policy easy, as it views inflation as transitory. For instance, it is still purchasing government bonds, even with the Producers Price Index or PPI hiking at a 40-year high.
However, Fed made similar moves before erasing the transitory narrative when debating inflation. Meanwhile, the BOJ would have to inverse its monetary policy whenever the Producers Price Index shifts to consumers.
The truth remains that Japan’s inflation stayed beneath 2% for decades, destroying the BOJ’s credibility. It may lead to a dramatic effect on the Forex dashboard with a substantial rise beyond the target. Nevertheless, the FX industry is a dominant one. Investors speculate and ensure safe positions will before any action by central banks. So, did JPY hit its lowest level or more to come?
AUD/JPY 24Hr Chart Suggests Potential Reversals
Meanwhile, the latest 2022 breakout after BOJ’s yield curve control remarks remains the final leg of the somewhat long trend. That means investors sold the yen well before the bank’s comment. The currency surged as the U.S stock market went higher.
Now that the United States stock market retraces (for instance, NASDAQ100 -28% YTD down) JPY pair might follow suit. The AUD/JPY chart presents a potential head-shoulders formation, which signals a massive head-shoulders setup. If the latest highs hold, investors should discount a move towards 80, especially if the stock market keeps declining.
Stay tuned for upcoming financial news.