Home USD/JPY Forecast: BOJ Defies Policy Tweaks Expectations

USD/JPY Forecast: BOJ Defies Policy Tweaks Expectations

  • The BOJ defied market expectations by maintaining ultra-low interest rates.
  • The BOJ decision sent the yen plunging against other currencies.
  • The BOJ did not alter its guidance for the yield on 10-year bonds.

Today’s USD/JPY forecast is bullish. The Bank of Japan defied market expectations on Wednesday by maintaining ultra-low interest rates, including a bond yield cap it was trying to preserve. This was in contrast to expectations that it would gradually wind down its enormous stimulus program in the wake of increasing inflationary pressure.

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Investors undid bets they placed, assuming the central bank would change its yield control strategy in response to the surprise decision. This sent the yen plunging against other currencies and bond yields falling to their lowest levels in decades.

Some experts interpreted this action by the BOJ as an indication that Governor Haruhiko Kuroda will hold off on making significant policy changes during his tenure, which ends in April.

At the two-day policy meeting, the BOJ maintained its yield curve control (YCC) targets, set at -0.1% for short-term interest rates and about 0% for the 10-year yield.

The central bank did not alter its guidance, which permits a 50 basis point range on each side of its 0% objective for the yield on 10-year bonds.

The BOJ strengthened a crucial market operation tool to effectively halt increases in long-term interest rates, underscoring its determination to continue defending the ceiling.

On March 9–10, Kuroda will hold his final policy meeting, capping a decade in charge of the institution that pioneered radical monetary stimulus.

USD/JPY key events today

Investors expect the US to release important figures, such as retail sales and the producer price index (PPI). The PPI is a measure of inflation at the manufacturing level and also serves as a consumer inflation indicator.

USD/JPY technical forecast: A sudden shift in sentiment to bullish

The 4-hour chart shows USD/JPY trading above the 30-SMA after a sudden break above. The price also broke above the 129.75 resistance level. It went on to touch the 131.50 resistance before pulling back. 

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The RSI also shows a sudden shift in sentiment that sent it trading far above 50. This supports strong bullish momentum. If this strength continues, bulls will likely break above the 131.50 resistance. However, the price might retest the 129.75 level before continuing higher.

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Saqib Iqbal

Saqib Iqbal

Saqib Iqbal is a market analyst, prop fund trader and mentor, serving the industry with his analysis and educational content since 2011. The author has great exposure to different financial markets and institutions. He's well-known for his day trading reviews and multiple timeframe analysis.