- The yen will likely end July with its first monthly increase since March.
- The BOJ made its bond yield curve control (YCC) policy more flexible.
- The annual US inflation rate rose at its slowest rate in over two years in June.
Today’s USD/JPY forecast is bullish. On Monday, the yen experienced a decline, continuing the losses it faced during a volatile session at the end of the previous week. Despite this, it seemed poised to end July with its first monthly increase since March.
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The Japanese currency went into a tailspin on Friday as traders tried to interpret the implications of the Bank of Japan’s (BOJ) decision. Notably, the BOJ made its bond yield curve control (YCC) policy more flexible. Furthermore, it loosened its defense of a long-term rate cap during its policy meeting while maintaining ultra-low rates.
By the end of the Friday session, the dollar had gained 1.2% against the yen. However, it had previously slipped 1% to a session low of 138.05 yen.
According to Chris Weston, head of research at Pepperstone, the BOJ’s adjustment to YCC was unexpected. However, it proved to be a brilliant move by the central bank. It allowed them to manage the potential volatility that could have resulted from a direct change to a -/+ 1% range in the YCC band.
Meanwhile, the dollar index rose but was on track for a monthly decline of around 1%, marking its second consecutive month of losses.
On Friday, data showed that the annual US inflation rate had risen at its slowest rate in over two years in June. Moreover, underlying price pressures receded, reducing the pressure on the Federal Open Market Committee (FOMC) to continue raising interest rates.
USD/JPY key events today
Investors are not expecting big economic releases from the US or Japan today. Therefore, they will keep digesting the BOJ policy tweak.
USD/JPY technical forecast: Bulls reclaim 30-SMA and RSI momentum.
On the charts, USD/JPY has returned above the 30-SMA, showing a return of bullish control. At the same time, the RSI shows a return of bullish momentum above 50. However, the price must start making higher highs to confirm a new bullish trend.
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At the moment, bulls are facing the 142.05 resistance level. A break above this resistance would make a higher high, confirming the start of a bullish trend. However, if the resistance holds, the price will pull back and likely enter into a consolidation period.
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