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  • The BoJ maintained its ultra-low interest rates on Friday.
  • The BoJ intends to increase the frequency of its bond purchases starting next month.
  • The dollar is climbing ahead of the Fed’s rate decision.

Today’s USD/JPY forecast is bullish. As concerns about a global recession dim the outlook for a robust recovery, the Bank of Japan held its ultra-low interest rates on Friday and kept its dovish stance. It solidified its position as an outlier among central banks worldwide, tightening monetary policy.

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The central bank reinforced its commitment to defending its ultra-loose monetary policy by announcing intentions to increase the frequency of its bond purchases starting next month.

According to BOJ Governor Haruhiko Kuroda, Japan is moving closer to meeting its 2% inflation objective.

However, he said that the central bank was far from raising interest rates. Kuroda dismissed the idea that the BOJ’s yield cap was to blame for the recent significant decreases in the value of the yen, confirming expectations that he won’t use rate hikes as a tool to arrest the currency’s declines.

Despite Kuroda’s dovish stance, the BOJ raised its inflation expectations and declared that price risks favored the upside.

On the other hand, the dollar has risen after a slew of positive data last week diminished hopes of a Fed pivot. Markets are expecting a 75bps hike this week.

“Markets have been kind of expecting a Fed pivot on monetary policy. I think that is too premature, given how resilient the economy has been and particularly how high inflation has been,” said Carol Kong, a currency strategist at the Commonwealth Bank of Australia (CBA).

USD/JPY key events today

Investors will pay attention to the Japan 10-Year JGB Auction, a good indicator of Japan’s debt situation.

USD/JPY technical forecast: Bears fail to keep the price below the 30-SMA

USD/JPY forecast

Looking at the 4-hour chart, we see the price trading above the 30-SMA and the RSI above 50, a sign that bulls are in charge. Recently, bears had a lot of momentum on their side, but they failed to keep the price below the 146.02 level.

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Bulls took over and pushed the price back above the 30-SMA showing they were ready to take over. The price will likely retest the 149.00 key level if bulls maintain their strength. The new bullish trend will be confirmed when the price makes higher highs and higher lows.

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