The USD/JPY Rises and Then Falls Following The BOJ Meeting
In October, the USD/JPY made a strong bearish reversal as the USD fell. The Bank of Japan and the Ministry of Finance, on the other hand, intervened in the markets following the JPY's long decline, and the pair reversed just below 152.
The BOJ also made a move, announcing a policy change in December, which helped send USD/JPY lower, and the price fell below 130 this year. Traders were expecting further policy changes to be announced at the BOJ meeting yesterday.
Instead of tweaking or abandoning it entirely, the BOJ announced no policy changes yesterday, but it revised inflation forecasts higher, disappointing JPY buyers. As a result, the USD/JPY rose to 131.60 from a 128 low.
The traders' heavy long positioning on the JPY suggested that speculators were betting on back-to-back major policy changes by policymakers, but I believe they cannot risk too much change in too short a period. The surprise factor, however, was that they doubled down on defending their yield curve control policy.
As the BOJ's gains faded, the price fell back. Someone had to ruin the BOJ's attempt to send a strong message today. This, combined with a softer USD today and the fact that the technicals are still supportive of the recent downside trend, encouraged USD/JPY sellers to return, indicating that the main trend remains bearish.