The volatility for USDJPY increased after the Bank of Japan kept its interest rate targets unchanged. It left its short-term interest rates at -0.1% and the target for its 10-year bond at zero. The BoJ reiterated it will defend the 10-year yield at 0.5%.
As a result, the USDJPY has appreciated, with the currency pair heading towards its R4 pivot (green vertical rectangle). An R4 day is rare. The price is being driven by short-covering and renewed long positions – the market had felt that the BoJ’s yield curve control may be abandoned. It is now readjusting.