Global macro overview for 19/09/2018
The Bank of Japan kept the interest rate at -0.1% as expected. The bank introduced a negative interest rate in January 2016. On Wednesday, the bank did not change any other benchmark and the profitability target of 10-year JGB is at the level of approx 0.0%. BoJ has kept its forward guidance for interest rates unchanged.
Analysts estimate that “under the governorship” of Haruhiko Kuroda, the Bank of Japan will maintain its current bias in its monetary policy until 2020. They add that BoJ will have to face next challenges, trying to sustain economic growth in Japan and bring inflation closer to 2.0%. Short-term risks include the September earthquake in Hokkaido, typhoons and a record heat wave. All this can affect the result of GDP in the third quarter.
Let’s now take a look at the USD/JPY technical picture after the decision was made. The market spiked up above the technical resistance at the level of 112.17 and made a new local high at the level of 112.43. This is the level of 1:1 Fibo geometry as well, so it can trigger a local pull-back on this market. Moreover, there is a clear bearish divergence forming at this time frame and the market conditions are now overbought, which adds another clue to the bearish case. The nearest technical support is expected at the level of 112.17 and is seen at the level of 112.04 and 111.82.