Yen Retreated Despite Central Bank Looking Toward Exit
By: Eddy Peng Mar 6, 2018
The U.S. dollar rallied, following gains in global stock markets, as concerns eased on President Donald Trump’s proposed tariffs. The yen retreated a bit from the record low since Nov. 2016. From the daily chart on the pair USD/JPY, it has been supported by downside price channel started from early 2017.
The end of the easy money era for worldwide economy over the last decade came into even sharper focus as the Bank of Japan started thinking when it might slow its stimulus program. Governor Haruhiko Kuroda’s remarks on Friday that the central bank will begin pondering how to complete its unprecedented easing around the fiscal year starting April 2019 was the clearest signal yet that a conclusion might be in sight to emergency support for the Japanese economy.
“It’s notable how over the past few weeks Kuroda has been forced into talking more specifically about the exit,” said Izumi Devalier, head of Japan economics at Bank of America Merrill Lynch. “A year and a half ago he would have shut down the discussion altogether with the blanket ‘it’s too early to talk about it’ statement.”
Since there is still some way reach its 2 percent target, which the BOJ forecasts will hit in fiscal 2019, raising the interest rate may impede current economic recovery. In this case, how to exit the QE in a right way to relieve potentially negative effects on economy would be the priority problem for the Japanese government.
As what it said before, a support from the lower price channel line may protect the price from subsequently descending. However, a break through will probably lead to further decline and here is the point which investors should be cautious.
With MACD applied on daily chart, we can see a bullish divergence as there are higher lows for MACD, coupled with lower lows for the price.
Chart 1: USD/JPY Daily
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