- The Bank of Japan (BOJ) has decided to gradually move away from its long-standing monetary stimulus program.
- The yen has experienced a depreciation of approximately 0.8%.
- The possibility of another rate hike by the Federal Reserve continues to support the strength of the US dollar.
Today, the outlook for the USD/JPY pair is optimistic due to the decline in the yen, which has reached a one-year low against the dollar. This change in the currency’s fortune was triggered by the BOJ’s cautious approach as they gradually move away from their long-standing monetary stimulus program. However, some investors are still hoping for more significant measures.
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Notably, the BOJ has announced its commitment to maintaining the 10-year government bond yield near 0%, but they now consider 1.0% as a loose “upper bound” rather than a strict cap. In addition, they have eliminated their pledge to defend this level by purchasing an unlimited amount of bonds.
Some analysts view this as a gradual end to the BOJ’s controversial Yield Curve Control (YCC) regime. As a result, the yen has fallen by nearly 0.8%, surpassing the 150 per dollar mark and reaching an intraday low of 150.26.
The weakening of the yen was somewhat expected, partly due to a Nikkei report on Monday suggesting that the BOJ might allow 10-year JGB yields to exceed 1%. Norihiro Yamaguchi, senior economist at Oxford Economics, commented, “The market had already priced in today’s decision due to the Nikkei article. Some had expected a complete elimination of YCC, which did not occur.”
Meanwhile, the US dollar has displayed overall strength, with the index set to end the month with minimal changes. Analysts have noted that the dollar continues to be supported by the possibility of another rate hike by the Federal Reserve, reflecting the ongoing resilience of the US economy.
USD/JPY key events today
Investors are expecting one significant report from the US:
- The CB consumer confidence report.
USD/JPY technical outlook: Bearish sentiment flips to bullish.
The USD/JPY price initially dipped to the support level of 149.00 before rebounding sharply. Moreover, the sharp reversal resulted in a break above the 30-SMA and the key resistance level of 150.00. Similarly, the RSI reached near oversold levels before returning to trade in bullish territory. These movements indicate a sudden shift in market sentiment from bearish to bullish.
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However, for this shift to lead to a bullish trend, the price must begin creating higher highs and lows, which requires breaking above the resistance level of 150.75. Otherwise, the price may enter a consolidation period near the key level of 150.00.
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