The yen is much stronger this morning thanks to an unexpected Bank of Japan operation. Earlier today, the BoJ unexpectedly tapered its long-dated government bond buying program. While quantitative easing remains in effect, the Bank sought to adjust the program in order to improve Japanese government bond market operations. This was seen in markets as a prelude to ending the asset buying program entirely, and the yen strengthened accordingly. Looking at USD/JPY, the pair fell to as low as 112.50 earlier in the day. As the dollar is bouncing back, the pair is currently trading closer to 112.90. While we believe the yen is likely to strengthen over the longer term thanks to lower inflation, today's Bank of Japan operation was fairly unexpected. Our medium-term trending indicator suggests a bearish trend.
USD/JPY is currently trading above 112.90. EUR/JPY is currently down and trading above 134.80.
This is a fairly light week for economic data relating to the yen. Consumer confidence ticked down to 44.7 vs. 44.9 in the previous month. Tomorrow, we'll see foreign reserves, the leading indicator and the coincident indicator. Finally on Friday, we'll get cross-border stock and bond investments as well as Eco-Watchers survey data. Last week, manufacturing and services PMIs missed expectations.
As the yen strengthens thanks to a weak US dollar, we are upgrading the yen to neutral in the short-term. Note that the currency is trading within normal conditions, based on technical indicators on the daily chart.
As the yen sells off on hopes for US tax cuts, we are downgrading the yen to bearish. Looking at the yen on a weekly chart, the currency is trading within normal conditions. This is based on various technical indicators when looking at a weekly chart.