Markets Analysis

BOJ’s monetary easing policy to continue for the time being, with the yen all the way down【May 1, 2023】

May 01, 2023

Markets Analysis

Fundamental Analysis

  • Major U.S. stock indexes continue to rise for a second day; major U.S. high-tech companies report strong earnings results
  • The Bank of Japan decided to continue its monetary easing policy, with no plans to change the policy in the near term
  • Yen weakened across the board; Euro-Yen and Pound-Yen hit multi-year highs
  • USD/JPY moves into the JPY 136 level; watch for a temporary correction with the 240-day moving average on the upside
  • Gold and crude oil prices move modestly, with assets concentrated in equity and currency markets
  • First Republic, a regional bank in the U.S., may go bankrupt. Watch for impact on the market in the future.

Technical Analysis

The yen has weakened across the board in the foreign exchange market following the Bank of Japan’s decision to ease monetary policy. In particular, the cross yen, GBPJPY and EURJPY have been at multi-year highs and are very likely to continue to rise. Japan has not changed its stance on monetary easing policy, although prices continue to rise. The U.K. and EU have high inflation rates and have a policy of raising interest rates going forward.

The pound sterling is at the JPY 171 level, but strong gains are likely to continue as interest rate differentials are widely expected to widen. We would like to trade with a push-buy policy for both crosses and the dollar.

Dollar-Yen (USDJPY)

The dollar has surged to the upper JPY 136 level. The decision by the Bank of Japan to ease monetary policy has resulted in an all-around depreciation of the JPY, and an analysis of the 4-hour chart shows a rebound at the 240 moving average line. While the yen is definitely higher, it is likely to rise in the first half of the week as there are few factors that will cause the yen to strengthen and the FOMC has almost factored in a rate hike.

[USDJPY / H4]

Estimated rangeJPY 135.18 – JPY 137.25
Resistance lineJPY 135.70
Support lineJPY 136.70

Pound-Yen (GBPJPY)

The U.K., which suffers from one of the highest inflation rates among major economies, can be expected to raise its policy rate in the future. The difference in interest rates between the two countries is attracting attention, and the GBPJPY is in a good position to rise.

However, the October 2022 high of JPY 172.10 is likely to be a conscious price, and a cycle of buying at the JPY 171 level and closing at the JPY 172 level should be considered.

[GBPJPY/ D1]
Estimated rangeJPY 169.30 – JPY 172.40
Resistance lineJPY 171.60
Support lineJPY 170.10

Euro-Yen (EURJPY)

Analyzing the 4-hour chart of EURJPY. It is important to analyze EURJPY with the Fibonacci Expansion in mind, as we can see that the pair is reacting to 61.8% and 100%, so we believe that the pair will be aiming for JPY 153.20, which corresponds to 161.8%.

Today’s expected range is JPY 151.08 on the upside. Since the upward trend remains unchanged, we would like to take a push-buy policy.

[EURJPY / H4]
Estimated rangeJPY 148.97 – JPY 151.08
Resistance lineJPY 150.90
Support lineJPY 149.55

Today’s Important Economic Indicators

Economic Indicators and EventsJST (Japan Standard Time)
Holidays in EU countries, UK and Asian countries

*Trading advice in this article is not provided by Milton Markets, but by Shu Fujiyasu Jr., a certified technical analyst.

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