USD/JPY Drops 4.3% After Surprise BoJ Move

Key Insights

• USD/JPY retreated towards the 131 level after BoJ changed its yield curve control policy. 
• USD/CAD pulled back after the release of Canada’s Retail Sales report. 
• AUD/USD retreated towards the 0.6660 level. 

USD/JPY Tests Multi-Month Lows

USD/JPY is down by 4.3% as traders react to the surprising decision of the BoJ. The Bank of Japan left the interest rate unchanged at -0.1% but widened its yield curve control.

The new yield cap for the 10-year bonds is set at 0.5% compared to the previous cap of 0.25%. The yield of the 10-year bonds, which was stuck near 0.25%, has immediately rallied above the 0.40% level.

BoJ’s move is a huge policy shift which indicates that the central bank is worried about rising inflation. Traders did not expect such a hawkish move from the BoJ and rushed to buy the Japanese yen after the decision was announced.

 

Technical levels won’t be in play today as some of the unfortunate longs will face margin calls. Traders should be prepared for fast moves and stay focused on the changes in market sentiment.

U.S. Dollar Retreats As Traders Focus On The Strong Yen

U.S. Dollar Index settled below the 104 level due to the strong move in USD/JPY. Meanwhile, Treasury yields continued to move higher as traders focused on the hawkish decision of the BoJ. Bond traders are worried that there will be no Fed pivot in 2023.

EUR/USD Faced Strong Resistance Near 1.0660

EUR/USD made an attempt to settle above the resistance at 1.0660 after the release of the Euro Area Consumer Confidence report but lost momentum and pulled back towards the support at 1.0630.

In case EUR/USD settles below the support at 1.0630, it will move towards the next support level, which is located at 1.0600.

GBP/USD Remains Under Pressure

GBP/USD  continues its attempts to settle below the support at 1.2150 as the British pound needs additional positive catalysts to rebound after the recent pullback.

Most likely, GBP/USD traders will stay focused on general market sentiment in the upcoming trading sessions.

USD/CAD Pulls Back After Retail Sales Report

USD/CAD made an attempt to settle below the 1.3600 level after Canada’s Retail Sales missed analyst expectations. Canada reported that Retail Sales increased by 1.4% month-over-month in October, compared to analyst consensus of 1.5%.

Other commodity-related currencies have been moving lower today despite the strong rebound in precious metals markets. AUD/USD pulled back towards 0.6660, while NZD/USD settled below the 0.6350 level.

For a look at all of today’s economic events, check out our economic calendar.