At important announcements/changes in policies like the one today where BOJ implemented negative rates, it usually takes some time before the market sinks in the implications and positions accordingly.
Currently, it is evident based on technical levels that USDJPY has touched the 116 important neckline ( ).
Also, because of the surprising policy change made by the BOJ today with a vote of 5-4, the pair has since retraced back up to the channel support sitting at about 121.4 it broke out of 3-4weeks ago, touched it, and retreated.
This support of the channel is now resistance - therefore, if price manages to break and close above, further upside is possible.
We are in the middle of important levels to watch for market sentiment, is the BOJ policy a sign of recognised weakness in the economy? Or is it more easy money and better times ahead?
Further complicating evaluations is the fact that the JPY has been seen as a safe haven in gloom & doom and uncertain times like our current times.
However, with NIRP/ZIRP, will investors want to hold the JPY, or will capital outflow happen - leading to more carry trading?
This may unfold to see the JPY losing it's status as a safe haven CCY.. what is so 'safe' about the JPY if BOJ continues to ease/further cuts rates when its unable to hit its target?
Additionally, we have to factor in the Fed. Are they still able to hike this year, given the recent developments?
As always, I believe in a mix of both Fundamental & to see a clearer picture.
I stand neutral at the moment.
Tread lightly. Sometimes, it's better to wait for the dust to settle.