The USDJPY was sharply lower in Asian / early European session on Tuesday (down around 3.3%) after the Bank of Japan left its interest rates unchanged but shocked markets by decision to widen the 10-yr bond yield movement from 25 basis points move either side, to 50 basis points.
The central bank expects its decision to allow more rise in long-term interest rates and to partially ease the costs of extended monetary stimulus.
The BoJ expect the latest measures to boost monetary policy framework and highlighted that it is not the beginning of exiting easy policy.
Investors bought yen after BoJ’s decision, sending the currency to the highest levels in 4 ½ months against US dollar.
Fresh acceleration lower weakened technical structure on a daily chart, as the pair eventually broke below 200DMA (135.72) which stayed below the price since late Feb 2021 and contained the recent attacks on Dec 2, 3 and 13,14.
Fresh bears also broke below former low at 133.62 (Dec 2), signaling continuation of a larger downtrend from 151.94 (Oct 21 peak, the highest since July 1990).
Negative momentum is gaining strength and moving averages turned to full bearish setup on daily chart, supporting the action, but RSI is near the border of oversold territory, suggesting that bears may face headwinds on approach to key supports at 130.39/00 (Aug 2 trough / psychological).
Close below 133.62 is needed to confirm bearish stance and keep focus at the downside, with selling upticks strategy favored while the action stays below 200DMA.
Res: 133.62; 134.51; 135.72; 136.22.
Sup: 132.09; 131.88; 130.80; 130.39.
