Yen Strengthens Following QE

The yen has recouped all of the losses seen after the BOJ took several measures earlier, including extending its asset purchase program.  As we noted, the BOJ actions did not disappoint the market, and in fact by taking a number of measures and increasing the asset purchases by the upper end of expectations (JPY10 trillion), the BOJ may have been more aggressive than many had expected. 

Nevertheless as this intra-day chart from Bloomberg shows, after initially rallying on the announcement, the dollar has surrendered all of its gains and more.    The same can be said of the euro against the yen. 

Trading conditions are choppy and those that sold the yen against dollars (or euros, or Australian dollar) are being squeezed out.  Technically, the dollar and euro are recording outside trading days against against the yen.  Euro-yen looks particularly toppish as it failed to take out Monday's high near JPY103.85 earlier, while the dollar did make new four week highs. Initial support for the dollar is seen near JPY78.20.  Initial support for the euro may be see near JPY101.70.   

The yen's performance underscores our argument that QE does not always translate into a weaker currency.  Our argument is not based on economic theory as much as inductive reasoning; simply looking at actual bilateral currency performances.   We remain stuck too, in this light, by sterling's resilience too.