USD/JPY Bottom at 108 or 105 Next?

USD/JPY Bottom at 108 or 105 Next?

USD/JPY Bottom at 108 or 105 Next?

It took no more than 3 minutes for USD/JPY to fall 300 pips with the sell-off spilling over to the yen crosses. The meltdown in USD/JPY was driven by the Bank of Japan’s failure to add stimulus and indication to the market that they wanted to wait and see how negative interest rates affect the economy before easing again. While the BoJ maintained a dovish bias and lowered their GDP and inflation forecasts, the main takeaway from the BoJ meeting is the Japanese feel no immediate pressure to use monetary policy or currency intervention to turn around the economy. So if the BoJ did not intervene in April and passed on cutting rates last night, chances are traders will feel that they won’t intervene now unless USD/JPY drops to 105. They are clearly passing the baton to Prime Minister Abe and pressuring the government for more aggressive fiscal stimulus. So fundamentally we could see USD/JPY on the 106 handle and quite possibly even 105.

Technically the main support level for USD/JPY is the April low of 107.63. This is an 18 month low for the pair. If USD/JPY breaks this support level and we think it will, the next stop will be 106.65, the 38.2% Fibonacci retracement of the 2011 to 2015 rally.
If USD/JPY holds it, rallies will find resistance near 109.00

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