The Bank of Japan announced more monetary easing today and pumped $128 billion into money markets in a move set to reverse the appreciation of Yen against other currencies. Copy-catting the US Federal Reserve they also expressed their intention to target a 1% inflation for the period. This comes after disappointing GDP news which revealed that the Japanese economy contracted by 2.3% on an annualised basis, on expectations of a 1.8% shrinkage.
USD/YEN weak response
After being stop-lossed yesterday due to a market shake-up (just made a mental note to set wider stop losses), the news of more monetary stimulus did not surprise me at all. What is interesting from my point of view is the rather weak response of the USD/YEN: in Tokio trading it only inched from $77.49 to what is now $77.97. We may see more substantial moves in the more rich volumewise London and New York trading sessions.
I`m not looking yet for an entry point for a short position as there may be some firepower left in the BoJ`s arsenal. Trade carefully.