USD/JPY jumps 200-pips to cross 130.00 as BoJ holds interest rate, YCC policy intact

• USD/JPY rises over 200-pips on the BoJ inaction, eyes the biggest daily jump in seven months.
• Bank of Japan leaves benchmark rate, YCC policy unchanged.
• Yields rally following the BoJ announcements while equities, stock futures and DXY decline.
• BoJ Governor Kuroda’s speech will offer immediate directions ahead of US Retail Sales, PPI.

USD/JPY prints nearly 2.0% intraday gains as the Bank of Japan (BoJ) surprises markets by taking no action in the latest monetary policy meeting on early Wednesday. The reason could be linked to the market’s high expectations from the Japanese monetary policy officials.

That said, the BoJ announces no changes to their monetary policy settings in December, maintaining rates at -10bps and the 10-yr Japanese Government Bond (JGB) yield target unchanged at 0.00%.

Other than the absence of change in the BoJ’s Yield Curve Control (YCC) policy and the intact rates, the BoJ’s quarterly outlook report also allowed the USD/JPY pair to brace for the biggest daily upside since mid-June 2022.

As per the latest BoJ report, “Heightening of price growth is likely to sustainable price increase involving wage hikes.”

With this, the US Treasury bond yields reverse the early-day rebound to drop towards 3.50% while the S&P 500 futures print 0.30% intraday gains, following the mildly negative marks of the intraday performance. As a result, the US Dollar Index (DXY) marches towards 103.00, up 0.38% intraday but the press time.

Moving on, a speech from BoJ Governor Haruhiko Kuroda will be important for the immediate direction of the USD/JPY pair. However, major attention will be given to the US Retail Sales and PPI for December, expected 0.1% and -0.1% MoM versus -0.6% and 0.3% respective priors, amid the BoJ’s latest disappointment.

Technical analysis

Successful trading the beyond the May 2022 peak surrounding 131.35 becomes necessary for the USD/JPY bulls to retake control.