USD/JPY stays firmer past 138.00 after BOJ led 50-pip whipsaw with status quo

• USD/JPY remains mildly bid after a knee-jerk movement on BOJ.
• BOJ left monetary policy unchanged, quarterly report cites inflation fears for the time being.
• Risk-aversion jostles with downbeat yields to restrict immediate moves.
• BOJ Governor Kuroda’s speech awaited ahead of the key ECB for fresh impulse.

USD/JPY holds onto the daily gains, after the BOJ triggered a 50-pip move, as traders seek more clues during early Thursday morning in Europe. In doing so, the yen pair also justifies the market’s indecision ahead of the key monetary policy announcements from the European Central Bank (ECB).

The Bank of Japan (BOJ) matched market expectations by announcing no change in the current monetary policy. In doing so, the Japanese central bank kept the benchmark rate unchanged at -0.10% while keeping the target rate for the Japanese Government Bonds (JGBs) at 0.0%.

It’s worth noting, however, that the quarterly release of the BOJ Outlook report does cite the inflation fears and weighs on the yen. Also favoring the USD/JPY buyers are the downbeat GDP forecasts, as well as expectations of higher CPI, within the stated report.

Also read: BOJ Outlook Report: Risks to price outlook skewed to upside for time being, roughly balanced thereafter

Elsewhere, the market’s sour sentiment and cautious mood ahead of the ECB appear to keep the buyers hopeful. However, an absence of the Fed policymakers’ comments, due to the pre-Fed blackout period, appears to weigh on the US dollar and the USD/JPY prices.

That said, the risk-off mood could be linked to the fears of recession emanating from Europe and strong inflation data from the UK, as well as from Canada. Also underpinning the US dollar’s safe-haven demand were the Sino-American tensions and China’s covid woes.

While portraying the mood, S&P 500 Futures drop 0.15% intraday whereas Japan’s Nikkei 225 prints mild gains around 27,700 by the press time. Further, the US 10-year Treasury yields also stretch Wednesday’s pullback from the weekly top to 3.01%, down 2.2 basis points (bps) by the press time.

Moving on, a speech from BOJ Governor Haruhiko Kuroda will be the immediate catalyst to watch for the USD/JPY traders ahead of the ECB. Additionally, important will be the chatters surrounding inflation and recession.

Technical analysis

USD/JPY stays on the bull’s radar unless breaking a five-week-old support line and the 21-DMA, respectively around 137.50 and 136.70.