This morning, the Bank of Japan decided to leave interest rates unchanged at -0.10%. Its head, Kazuo Ueda, stated that:
→ the chances that the current ultra-loose monetary policy will change in January are very small;
→ further decisions of the Bank of Japan will be based on incoming economic information.
Thus, rumors that the Bank of Japan might raise rates from the negative zone did not come true. As a result, the NIKKEI index rose to November highs, and the yen weakened.
The 4 hour USD/JPY chart shows that:
→ The price forms a downward channel (shown in red). The strengthening of the yen against the US dollar, observed since November, was caused by both rumors related to the Bank of Japan and the prospect of a rate cut by the Federal Reserve.
→ The lower border of the channel pushed the price upward on December 7, indicating support at 141.65.
→ On December 14, there was an attempt at a bearish breakdown of this support. But instead of developing a downward movement to another touch with the lower border of the channel, the price entered into consolidation (an early bullish sign), which lasted until the end of last week and marked the resistance level of 142.5.
→ The closer the Bank of Japan’s decision was, the stronger the bulls became. After breaking through the level of 142.5, it was tested. Moreover, not only the level of 142.5, but also the median line of the channel showed its support role.
The upward momentum that the USD/JPY market has received may develop during today’s American session. It is possible that the quote will reach resistance at 145 yen per dollar, which is strengthened by the upper boundary of the downward channel.
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