If you're wondering why the yen is falling so hard just purely based on a no policy change decision by the BOJ, it is all about understanding the weight and the market backdrop coming into the decision. The fact that the Japanese central bank doubled down on defending its yield curve control policy only adds to that while squashing bond bears in the JGB market at the same time.
USD/JPY has seen a big jump of over 2% on the day now to above 131.00. So, let's take a look to see how that has changed in terms of the technical picture.
For starters, the hourly chart shows that buyers have now seized near-term control after breaking back above both the 100 (red line) and 200-hour (blue line) moving averages. The latter will be a key focus point in determining near-term sentiment, sitting at 130.68 currently. Keep above and buyers will stay in control but fall back below and we'll be caught back in a tussle towards the 130.00 mark.
But perhaps the daily chart provides a better depiction of the significance of the jump today:
In the sense that it doesn't quite mean as much as USD/JPY buyers are hoping for. There is still much work to do in order to justify any turnaround in the downtrend, with the key trendline resistance (white line) still holding for now - seen closer to 132.45.
Buyers will have to break above that in order to even begin any semblance of an upside push but even so, there is also a developing pattern of lower highs, lower lows (or at least lower lows) and that vindicates a more bearish trend at the moment.
So, yen bulls were definitely left disappointed by the BOJ but that doesn't mean that they are taken out of the picture completely. The BOJ is likely biding their time and will ease the market into any major policy changes and so long as inflation data in Japan continues to justify the potential for a policy pivot, I don't expect the speculative shorts on USD/JPY to die down so easily.
