USD/JPY retreats from $109.00 as BoJ considers new measures

USD/JPY has lost around 2% in the past few days after it failed to move above the $109.40 resistance. In the meantime, Bank of Japan (BoJ) is considering new measures to ease corporate funding strains and inject more funds into companies.

Fundamental analysis: BoJ considering a set of new measures

Reuters reported earlier today that the BoJ is considering new actions to “ease corporate funding strains” and inject more funds into the embattled companies. The media giant says, citing unnamed sources, that the central bank considers increasing purchases of corporate bonds and commercial paper.

“Corporate funding conditions continue to worsen. The focus for the BOJ is still crisis response, not what measures it can take to reflate the economy,” one of the sources said to Reuters. 

“The BOJ took steps to ease corporate funding strains in March. If further measures are necessary, they will likely be discussed at April’s rate review,” another source added.

Another route that the BoJ may use is paying financial institutions that borrow money from the central bank, by simply offering these institutions loans with negative interest rates. The main aim of the BoJ, similarly to almost all central banks today, is to boost economic activity and purchasing power. 

The BOJ has its regular meeting set for April 27-28. At its last meeting in March, the bank committed to increasing the buying of corporate bonds and commercial paper by 2 trillion yen ($18.61 billion) until September.

Technical analysis: USD/JPY fails at $109.40

USD/JPY trades around 2% lower compared to last week’s levels after the pair failed to clear the resistance around the $109.40 mark. Following a rotation near this level, the bears have managed to push the price action below 100-DMA and 200-DMA, as both of these technical indicators trade in $108s.

As seen in the chart above, the sellers are in control now as the greenback faces increased selling pressure across the board. USD/JPY is now moving towards the intraday support near the $107.00 handle, while $106.50 hosts a more meaningful support. The key weekly support zone is located around the $105.00 mark. 

On the upside, the buyers will have to finally regain $109.40 before considering testing the multi-month highs around the $111.50 handle. 

Summary

USD/JPY has retreated from the weekly highs near $109.40, after the buyers failed to sustain the positive momentum. The sellers are now in control as they look to push the price action below the $107.00 handle as BoJ discusses new measures to support the economic activity and spur demand.