Global macro overview for 29/01/2016:
The Japanese yen has fallen sharply on Friday after the Bank of Japan shocked financial markets by lowering interest rates into negative territory from 0.10% to -0.10%. Other fundamental data were worse than expected as well, including the national CPI index, household spending and industrial production. However, the BoJ Governor Haruhiko Kuroda has warned recently that the bank would continue monetary easing if necessary. It looks like the BoJ actions aimed to increase the inflationary pressure has been unsuccessful, so last night the bank decided to follow the path which the ECB took last year. Still, there is the question whether negative rates would help to fight the inflation? Some clues can be borrowed from the experience of ECB: it had implemented negative rates, but inflation levels didn't respond.
From the technical point of view, the reaction of the USD/JPY pair was quite dramatical, as USD/JPY has surged to its highest levels since late December. However, there is still one more resistance to break before we can conclude the longer term upward trend has resumed: daily technical resistance is at 123.77. When the pair breaks this level, the bulls will set their new target at 125.84 and beyond.