The Japanese yen is extending its impressive depreciation on Friday, momentary pushing USD/JPY above 90.00 during overnight trading and leaving the door open for further losses, as well as a potential profit taking impasse, ahead of the next BoJ monetary policy meeting.
… Pump up the yen
Yesterday's news, which signaled the Japanese monetary authority would announce an open-ended programme to rump up asset purchases until the inflation figures reach the 2.0% level - in line with other major central banks' inflation policies - has shed some extra light on the most relevant issue in the present trading week, emphasizing at the same time that the Japanese authorities are going serious now. It looks like they are preparing all of their ammunition to beat deflation, and why not, PM S. Abe could see this golden opportunity to differentiate himself from past politicians that failed to deal with the issue.
What's more, recent comments by Japan Economics Minister, A. Amari regarding the undesirable effects of an extremely weak yen, are almost in line with Yale Professor Hamada, advisor to PM S. Abe, who stressed that a level at 110.00 would be too weak.
In addition, BoJ officials would be mulling the idea of lowering the interest paid on the central bank's reserves, from the actual 0.1% to possibly even negative. All in all, market participants must wait until next week for all these rumors and events to unfold, at one of the most hotly anticipated BoJ meetings in the last years.
"The correction lower has terminated well ahead of the 86.28 uptrend. Pressure remains on the topside and move above 90.25 will we suspect trigger another leg higher. Our target remains 93.32 - the measurement higher of the triangle", commented technical expert Karen Jones at the German lender Commerzbank.
In line with the market sentiment surrounding the JPY, the in-house Bullish Percentage Index is now showing extremely oversold levels in the yen-based pairs according to point and figure pattern, printing values close to zero.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.