- Market participants expect that US interest rates will remain unchanged.
- The yen plunged 1.7% on Tuesday, reaching a one-year low of 151.74 per dollar.
- The Bank of Japan raised its inflation forecasts but left policy rates unchanged on Tuesday.
The USD/JPY forecast witnessed a slightly bearish shift on Wednesday as the weak yen staged a comeback, fueled by renewed intervention threats from Japan. Additionally, investor attention shifted to a Federal Reserve policy meeting later in the day.
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Market participants expect that US interest rates will remain unchanged. However, the release of Treasury refunding details could influence the bond market.
After plunging 1.7% on Tuesday, reaching a one-year low of 151.74 per dollar, the yen stabilized Wednesday. This stability followed straightforward comments from Japan’s top currency diplomat, Masato Kanda. He stated that “speculative trading seems to be the biggest factor behind recent currency moves.” As such, authorities were ready to respond.
Notably, the Bank of Japan raised its inflation forecasts but left policy rates unchanged on Tuesday. Furthermore, it redefined the 1% limit on 10-year government bond yields as a reference rate rather than an absolute cap.
Nevertheless, this policy adjustment did not close the substantial interest rate differentials between Japan and other countries. Meanwhile, Deutsche Bank macro strategist Alan Ruskin said the yen declined despite the BOJ’s adjustment. Consequently, the future of the dollar/yen rate will likely be determined by the dollar’s performance and the US economy.
USD/JPY key events today
The pair will likely have a volatile day as the US will release major reports like,
- ADP Nonfarm Employment Change (Oct)
- ISM Manufacturing PMI (Oct)
- JOLTs Job Openings (Sep)
- Fed Interest Rate Decision
USD/JPY technical forecast: Rally hits a wall around 151.51 resistance.
On the charts, USD/JPY made a steep climb, breaking above the 30-SMA and key resistance levels. This rally has paused near the 151.51 resistance level, where bears are trying to drag the price lower. Meanwhile, the RSI rose to the overbought region before retreating. It indicates strong bullish momentum.
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Bears attempted to reverse the trend by pushing the price below the 30-SMA and the 150.00 key level. However, bulls have returned to the market more robustly, taking back control. Moreover, the price has posted a new high above the 150.75 level, continuing the previous bullish trend. The price will likely retest the 150.75 level as support before continuing higher.
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