Japanese Yen Collapse, Beware of Intervention, EUR/GBP Maintains Trading Range

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Analysis and news of the Japanese yen, EUR/GBP:

Japanese yen tumbles as BoJ sticks to YCC commitment

Arguably one of the Bank of Japan’s most exciting monetary policy meetings of late, given the significant depreciation of the yen. However, despite the move in the Japanese yen, that hasn’t deterred the BoJ from sticking to its pledge to control the yield curve, with the central bank pledging to buy 10-year JGBs at 0.25% every business day. in fixed rate transactions with no upper limit. Additionally, the BoJ also maintaining its rate guidelines, this prompted USD/JPY to hit new two-decade highs, testing 131.00,

Bank of Japan comments

BOJ KEEPS ORIENTATION; RATES REMAIN AT CURRENT OR LOWER LEVELS

BOJ: WILL OFFER TO BUY 10-YEAR JGB AT 0.25% EVERY BUSINESS DAY VIA FIXED RATE TRANSACTIONS, UNLESS IT IS VERY LIKELY NO OFFER WILL BE SUBMITTED

For a turnaround, you’ll need Japanese officials to show signs of discomfort, which, at the time of writing, the MOF says recent currency movements warrant extreme concernadding that they take appropriate action if necessary and communicate with the BoJ.

That said, it is important to note that next week is Japanese Golden Week, which means volumes will be lighter and thus increase the possibility of outsized movement. Additionally, it is worth watching the direction of US yields given the closeness of trading between the two.

Source: Refinitiv

EUR/GBP Range maintained

As stated earlier in the week, the euro and the pound have little advantage and the EUR/GBP therefore remains in the range. The 200DMA once again caps the brief rise in the cross, which is now back below the 0.8400 handle. Meanwhile, with the US Dollar past its pandemic peak at 103 and on track to test the 2017 high at 103.82, this would likely weigh more on the Euro than the Pound given the larger weighting. . Not to mention the modest respite in the equity space providing mild support for the higher beta pound, further cementing range trading in the cross. Short term support at 0.8370-75 and 0.8350.

EUR/GBP Chart: Daily Timeframe

Japanese Yen Collapse, Beware of Intervention, EUR/GBP Maintains Trading Range

Source: Refinitiv

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