<p style=““ class=“text-align-justify“>As is the case with every Lunar New Year, there will be a week-long break for Chinese markets. As such, that will impact liquidity conditions somewhat during Asia trading. Other markets will not be impacted, so expect the usual day-to-day in Europe and North America.</p><p style=““ class=“text-align-justify“>To those celebrating, I wish you and your family a healthy, prosperous and Happy Lunar New Year! 恭禧发财~</p>

This article was written by Justin Low at www.forexlive.com.

<ul><li>We have eradicated deflation during my tenure at least</li><li>Economic growth has also been regained since 2013</li><li>Accommodative monetary policy has helped to change the Japanese economic structure</li><li style=““ class=“text-align-justify“>But unfortunately, we still haven’t achieved 2% inflation target in a sustainable manner; that is the only regret I have</li></ul><p style=““ class=“text-align-justify“>Given such a defeated remark, I think that essentially seals the deal that we should not expect any major policy changes to follow by the BOJ until we see Kuroda step down in April.</p>

This article was written by Justin Low at www.forexlive.com.

<ul><li>Japanese economy is still recovering</li><li>Labour market is tightening, we expect wages to rise further</li><li>That will help us to meet 2% inflation target in a sustainable, stable manner</li><li>But expects inflation to start declining from February to below 2% next year</li><li>That is why BOJ is maintaining more accommodative policy</li></ul><p style=““ class=“text-align-justify“>This fits with the narrative that the central bank has put out earlier this week with their latest policy decision. On the headline, he is referring to the tweak in the yield curve control policy – defending the move as being one to address market functionality instead.</p>

This article was written by Justin Low at www.forexlive.com.

<ul><li>Fiscal policy shouldn’t force monetary policy to do more</li><li>ECB does not target an exchange rate (when asked about EUR/USD moving to 1.20)</li></ul><p style=““ class=“text-align-justify“>Some token remarks by Lagarde to start things off. Nothing that we haven’t heard of already as of late from the ECB.</p>

This article was written by Justin Low at www.forexlive.com.

<p style=““ class=“text-align-justify“>There isn’t much in terms of headlines driving the move but perhaps the bond market is one that is worth paying attention to with 10-year Treasury yields now up 3.8 bps to 3.431%, sitting at the highs for the day. That is underpinning yen pairs at the moment, with USD/JPY in particular moving back up to retest its 200-hour moving average (blue line):</p><p style=““ class=“text-align-justify“>Other major currencies are still sitting within their earlier ranges, so this is very much just a yen move for the time being.</p><p style=““ class=“text-align-justify“>Keep below the 200-hour moving average and the near-term bias stays more neutral but push back above and buyers will capture some form of near-term control at least. That said, there are bigger resistance levels to contend with as highlighted <a target=“_blank“ href=“https://www.forexlive.com/news/dollar-holds-more-mixed-so-far-in-european-trading-20230120/“ target=“_blank“ rel=“follow“>here</a>.</p><p style=““ class=“text-align-justify“>The post-BOJ volatility is still something that traders are dealing with and we have BOJ governor Kuroda (alongside ECB president Lagarde) speaking in a panel at Davos coming up.</p>

This article was written by Justin Low at www.forexlive.com.