The USD/JPY traded in a tight range yesterday after the release of negative U.S. existing home sales numbers. However, the pair climbed back after pressure was put on the yen with the market expecting the Bank of Japan (BoJ) will announce today the expansion of its monetary stimulus program. This will be done to counter a situation of falling prices. The threat of deflation has loomed over the Japanese economy. An economic recovery will be made much more difficult as prices decline with consumers choosing to delay big purchases in hopes of further price declines in the future.
Yesterday the pair traded at a high of 90.32 after opening the day at 90.07.
Many traders were tentative to take on new large positions in the Yen before the BoJ press conference that accompanies the interest rate release. We could see a decline in the Yen during today's trading as the BoJ is expected to hold interest rates steady, but could increase its programs of either emergency lending to Japanese companies or further purchases of Japanese government debentures. This could lead to a weaker Yen with the pair potentially rising to the resistance level of 91.75.