- Japanese inflation soared to 4-decade highs in October, but BoJ maintains its policy.
- The BoJ’s currency market intervention contained the USD-JPY rally.
- Elliot Waves theory suggests another possible trial to 150.
The Japanese yen’s swift slump remains the most notable market event this year as we near 2022 end. All yen pairs surged, but USD-JPY stood out of the crowd. Moreover, most individuals watch this pair whenever interacting with the yen.
Meanwhile, the currency surprised market players after breaking high following the Russian attack on Ukraine. A bullish breakout remained a surprise since the Japanese yen served as a haven currency. Thus, the Europe conflict could have catalyzed massive yen demand, though the opposite occurred.
116 was a crucial level. Nothing interfered with the USD-JPY bulls once beyond this mark, even the intervention by the Bank of Japan.
BoJ’s Currency Market Intervention
Only China surpasses Japan as far as foreign exchange reserves are concerned. In 2022, the Boj intervened in the Forex market to rescue the yen’s slump. It resorted to that by selling the United States dollar to purchase yen. That came as the Bank of Japan desperately looked to curb USD-JPY’s rise.
The bank succeeded at the moment. Nevertheless, it needed two interventions – at 146 and beyond 150. Meanwhile, can the USDJPY still climb higher? Further, why is BoJ seem unbothered by inflation?
Japan Inflation Hit 40-Year Peak
October saw Japan’s CPI (Consumer Price Index) hitting a four-decade high. The nation’s CPI bares fresh food costs but includes energy prices. It noted a 3.6% year-over-year increase in October – the fastest surge since early 1982. Nevertheless, the Bank of Japan doesn’t alter its fiscal policy stance.
Contrarily, the central bank maintains an ‘easy’ approach while ignoring the worldwide rate hiking amidst the battle to contain inflation.
140 Represents Massive Support
The BoJ’s intervention succeeded, considering the charts’ readings. The USD-JPY exchange rate dipped from 150 to under 149, ending yesterday at 140.45. Nevertheless, we can ignore the bullish bias. Markets rarely decline or advance in a conventional line. Thus, pullbacks remain normal.
The bullish bias seems to have ended as the market climbed in a 5-wave structure. Elliot Waves theory states that such tendencies emerged amid impulsive waves. Meanwhile, the wave attempted a move beyond 150 and the current dip being part of a 4-wave means another possible shot to 150.