Yen has lost some ground recently, but the latest comments from the new Bank of Japan Governor Kazuo Ueda kept demand for the national currency. Ueda stated that he would abandon the central bank's yield curve control program as soon as the first signs of achieving inflation targets appear.
The comment allowed yen to maintain its position against dollar, which rose recently due to the Fed's persistent tight policy.
Clearly, the initial reaction to the comment indicates the spreading rumors among market participants that the Bank of Japan will abandon yield control under the new governor. Now, traders have certain benchmarks to rely on when building a trading strategy. Goldman Sachs and Bank of America expect monetary policy adjustments as early as July this year.
Ueda, during his first speech as governor on April 28, said that although core inflation is improving, the bank is not at the stage where it can confidently say that the price target will be achieved shortly. He explained that inflation in Japan is currently determined by high-cost factors and is likely to slow down only by the fall of this year.
Therefore, as long as there is demand for dollar, yen will continue to weaken, especially since the Bank of Japan is trying to reach its targets. This means that buyers need to push the quote above 135.60 if they want to see further growth to 137.80, 139.90 and 142.20. If pressure on USD/JPY returns, which could happen today if data shows a sharp slowdown in price pressures in the US, there will be a price decline to 133.50, 129.60 and 127.15.
In EUR/USD, bulls have fewer chances to continue a rally. In order to do so, the quote has to stay above 1.0940 and take control of 1.0970 along with 1.1000. This will allow a rise beyond 1.1030, heading towards 1.1060. In case of a decline around 1.0940, the pair will fall to 1.0910 and 1.0870.