- Suzuki defended Japan’s monetary policy, saying it only sought to stabilize prices, not weaken the yen.
- Policymakers are concerned about the yen’s weakness and its impact on the cost of living.
- Japan is intervening more in the FX market with short-lived results.
Today’s USD/JPY forecast is bearish as the yen strengthens after Japan’s intervention to support its weak currency. Shunichi Suzuki, the finance minister of Japan, stated on Tuesday that there was no conflict in policy between his ministry’s purchase of yen to strengthen the currency and the Bank of Japan’s (BOJ) printing of money to maintain its ultra-loose monetary policy. He claimed that the central bank’s strategy did not target particular currencies but sought to stabilize prices.
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To assist the frail economy, the BOJ plans to maintain ultra-low interest rates during its two-day policy meeting on Friday, even if it means accelerating the yen’s unwanted decline to fresh 32-year lows.
Policymakers have expressed concerns regarding the effect of a weak yen on living expenses. Investors view the BOJ as an outlier since it has maintained ultra-low interest rates while other central banks have lifted rates to tackle rising inflation.
Japan has been making yen purchases to protect the currency against significant losses brought on by the growing gap between Japanese and American interest rates.
The so-called “stealth” interventions by the authorities, which came quickly after one another, have shown their determination to combat what they have dubbed “intolerable and speculative” yen-selling. However, the results have been fleeting.
USD/JPY key events today
Investors await the Bank of Japan outlook report to shed light on the BoJ’s perspective on inflation and economic conditions, two important variables that will affect how monetary policy is implemented. There will also be a new home sales report from the US.
USD/JPY technical forecast: Bearish engulfing candle initiates downtrend
Looking at the 4-hour chart, we see the price trading below the 30-SMA and the RSI below 50, showing a shift in sentiment to bearish. The bullish trend could not go beyond the 151.76 level. At this point, bears returned with so much momentum, as seen in the engulfing candle.
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The price broke below the 30-SMA and has since retested it. If bears can maintain this sudden boost in momentum, the price will likely take out the 147.05 support and make a new lower low. Such an occurrence would confirm the bearish trend.
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Saqib Iqbal
