The GBPJPY is surging in trading today after the Bank of Japan kept rates and policy unchanged.
Looking at the hourly chart, the price broke above a topside swing area near 167.96, and after breaking and then retesting the level, the price has stepped higher and higher and higher. The current price (as I type) is extending even higher to a new intraday high of 170.598. It would take a move below the 38.2/50% of the trend move higher today to worry the buyers in the short term (see yellow area in the chart above).
Taking a broader look at the daily chart, the price is moving toward the extremes seen in 2022. The high price last year reached 172.118. That high was the highest level going back to February 2016 (not shown on the chart below). Ahead of that extreme, the price is also testing a modest swing area between 170.09 and 170.588.
If traders want to pick a top before the extreme high, this area is it. However a move above, and I could see a race toward the high from last year (stops).
Meanwhile, the USDJPY is trading to a new high, and in the process is moving closer to the 38.2% retracement of the move down from the 2022 high to the January 2023 low. That level comes in at 136.656. Above that is the 200 day moving average at 137.00. Looking at the daily chart, back in March the price moved above the 200 day moving average (see green line in the chart below), but could not close above that level. The USDJPY has not closed above its 200 day moving average since December 19, 2022.
KEY target for both buyers and sellers at least in the short term.
Fundamentally, the Bank of Japan (BOJ)- with Ueda at the helm for his first meeting - maintained its monetary policy in April, keeping the short-term interest rate target at -0.1% and the 10-year JGB yield curve target. The bank made these decisions unanimously and did not change the policy settings. The BOJ has decided to conduct an examination of its monetary policy and tweaked its forward guidance, committing to additional easing steps if needed. The bank removed references to the COVID-19 pandemic and interest rate pledges from its forward guidance and will spend 1 to 1.5 years to review its monetary policy guidance. The market interpreted that timeline to mean the BOJ was on hold permanently.
Later Ueda tried to walk back his comments (or sway the markets interpretation) saying the BOJ could change policy including a normalization during the review process saying "we are not starting the review with the aim of normalizing, but it's not zero chance we begin normalizing during the review period." Nevertheless, the JPY continues to be hit by traders.
