Home USD/JPY Forecast: BOJ’s Policy Decision Leaves Yen Vulnerable

USD/JPY Forecast: BOJ’s Policy Decision Leaves Yen Vulnerable

  • The Bank of Japan chose to maintain its ultra-easy policy on Friday.
  • The Federal Reserve chose to keep interest rates unchanged on Wednesday.
  • Investors await the upcoming testimony of Federal Reserve Chair Jerome Powell to Congress.

Today’s USD/JPY forecast is bullish. On Monday, the dollar rose slightly as investors continued to digest the outcomes of many central bank meetings held the previous week. Of notable significance was the decision by the Bank of Japan to maintain its ultra-easy policy. This has contributed to the vulnerability of the yen. 

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As widely anticipated, the Bank of Japan, on Friday, opted to maintain its short-term rate target of -0.1% and a 0% cap on the 10-year bond yield in its yield curve control policy. The Bank of Japan’s commitment to its ultra-easy policy has significantly impacted the yen’s overall fragility in the foreign exchange markets.

Another major event last week was the Federal Reserve’s decision to keep interest rates unchanged on Wednesday. However, the central bank hinted at the possibility of future rate hikes to curb inflationary pressures. This stance has caught the attention of market participants who are closely monitoring the trajectory of US monetary policy.

Looking ahead, market focus is anticipated to shift towards the upcoming testimony of Federal Reserve Chair Jerome Powell to Congress later in the week. Analysts and investors eagerly await Powell’s remarks as they anticipate a potentially hawkish stance.

Notably, since the conclusion of the recent central bank meeting, several Federal Reserve officials have already expressed a more hawkish tone. Consequently, there could be a shift in the central bank’s monetary policy approach.

USD/JPY key events today

Today will likely be a slow session for USD/JPY as the US observes a public holiday. Furthermore, investors don’t expect important economic releases from Japan.

USD/JPY technical forecast: Bulls seem ready to go beyond 142.00.

USD/JPY technical forecast
USD/JPY 4-hour chart

The bullish bias for USD/JPY strengthened after the price broke above the 141.50 resistance level. This is because the price made a new high, pushing farther away from the 30-SMA. Moreover, solid bullish momentum exists, with the RSI trading above 50.

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After the pair hit fresh highs near 142.00, the price returned to retest the 141.50 level as support. After that, the bulls have returned and seem prepared to challenge the recent highs at 142.00.

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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.