USD/JPY Forecast: BoJ to Sustain Policy Tightening Pressure

USD/JPY Forecast: BoJ to Sustain Policy Tightening Pressure

  • 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.

-Are you looking for automated trading? Check our detailed guide-

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.

-If you are interested in forex day trading then have a read of our guide to getting started-

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.

Looking to trade forex now? Invest at eToro!

67% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.




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.