Global macro overview for 21/09/2017

Global macro overview for 21/09/2017:

The Bank of Japan has decided to leave the interest rate at the level of -0.10%. In the Monetary Policy Statement, BoJ maintained its upbeat view on the economy, indicating that even without the additional stimulus from BoJ, the economy should recover gradually and inflation should accelerate towards 2.0% target. One of the BoJ board members, Goushi Kataoka, dissented from the decision, arguing that the current monetary policy is not strong enough to push the inflation towards the projected target by the projected time frame of around 2019. He added that inflation is likely to continue rising for the time being amid oil prices and foreign-exchange rates, not because of the effects of the current yield curve program. Moreover, in November 2016, he argued that the BoJ should have expanded its easing and that was just two months after the implementation of the yield curve control program. In his opinion, the fiscal policy should play a greater role in revitalizing the economy and supports shelving a sales-tax increase planned for October 2019.

The BoJ watchers broadly expected that the central bank will stay on the course at least through the end of Kuroda's current term in April, even as the balance sheet nears the size of Japan's economy. That leaves Japan's central bank increasingly out of step with its global peers and means an ever-growing balance sheet. Nevertheless, the recent hawkish remarks from Fed Chairperson Jannet Yellen might work in Japan's favor by keeping the pressure on the Yen and supporting prices. Though the BoJ is now behind the Fed, the Bank of England, and the European Central Bank, all of them might announce other steps in normalizing the monetary policy soon enough.

Let's now take a look at the USD/JPY technical picture on the H4 time frame. The market has almost hit the 78%Fibo retracement of the previous swing up and now the price is falling down due to the overbought market conditions and bearish divergence between the price and momentum oscillator. The next support is seen at the level of 112.19 and 111.04.

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