Home USD/JPY Outlook: Yen Slides Amid BoJ Policy Shift

USD/JPY Outlook: Yen Slides Amid BoJ Policy Shift

  • The BOJ tiptoed away from its longstanding monetary stimulus program.
  • The yen depreciated by approximately 0.8%.
  • The dollar continued to be supported by the possibility of another Fed rate hike.

The USD/JPY outlook is optimistic today, driven by the yen’s decline, which finds itself skimming the depths of a one-year low against the dollar. This change in fortune unfolded when the Bank of Japan (BOJ) tiptoed away from its longstanding monetary stimulus program. However, this cautious approach has left some investors yearning for more substantial measures.

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Notably, the BOJ announced its commitment to maintaining the 10-year government bond yield near 0%. However, they redefined 1.0% as a loose “upper bound” rather than a rigid cap. Furthermore, they eliminated their pledge to defend this level by buying an unlimited amount of bonds.

Some analysts considered this a slow end to the BOJ’s controversial YCC regime. Still, the yen fell by nearly 0.8%, surpassing the 150 per dollar mark and reaching an intraday low of 150.26. 

The yen’s weakening had been anticipated, 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, stated, “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 showed broad strength. The index appeared poised to end the month with minimal changes. Nonetheless, analysts pointed out that the dollar continued to be supported by the possibility of another Fed rate hike. It reflects the ongoing resilience of the US economy.

USD/JPY key events today

Investors expect one significant report from the US,

  • The CB consumer confidence report.

USD/JPY technical outlook: Bearish sentiment flips to bullish.

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

The USD/JPY price dipped to the 149.00 support level before pulling back sharply. Moreover, the sharp reversal broke above the 30-SMA and the key 150.00 resistance level. Similarly, the RSI dipped to near oversold levels before returning to trade in bullish territory. These moves 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 start making higher highs and lows. That means a break above the 150.75 resistance level. Otherwise, the price might start a period of consolidation near the 150.00 key level.

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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.