FxWirePro: Yen tests critical support; bullish outlook maintained

Since yesterday, the yen has weakened sharply after the Bulls were stopped around the critical resistance of 109 per dollar. Since yesterday, the yen has weakened around 200 pips against the dollar and is currently trading at 111.3 per dollar.

After U.S. Federal Reserve announced an interest rate hike of 25 basis points earlier this week and unveiled plans to trim its bond purchases beginning by the end of the year, the market is once again focusing on the monetary policy divergence. Bank of Japan (BoJ) announced this morning that it is keeping its policy unchanged with interest at -0.1 percent and asset purchases of ¥80 trillion per annum.

The yen is currently testing a critical support around 111.6 area, a break of which might change the outlook in the short run. A lack of risk aversion buying is also pushing the yen lower. Currently, or buy call is active in yen, where we enter position around 114, 112 and at the break of 110 per dollar. We do not see any need to change this call. However, we would be closely monitoring price movements.