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  • Fitch placed the United States “AAA” debt ratings on negative watch.
  • The Treasury has cautioned that it may be unable to meet all its financial obligations past June 1.
  • The BOJ might abandon the controversial bond yield cap this year.

Today’s USD/JPY forecast is bullish. Concerns over a potential US default and Fitch’s decision to place the United States “AAA” debt ratings on negative watch propelled the dollar on Thursday. 

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Paradoxically, the demand for safe havens has boosted the greenback’s value. This is despite the looming deadline of June 1, known as the “X-date.” This is when the Treasury has cautioned that it may be unable to meet all its financial obligations. 

Additionally, the US currency has risen due to reduced expectations of Fed rate cuts this year. The economy has displayed resilience against the impact of the central bank’s previous aggressive tightening measures.

Elsewhere, Toshihiro Nagahama, an economist, said that if certain risks, such as troubles in the global banking sector, diminish, the BOJ might abandon the controversial bond yield cap this year. 

Nagahama emphasized the importance of Japan maintaining monetary and fiscal support to sustain positive indicators in wages and consumption. He stated in an interview that until there is steady wage growth next year, the BOJ should refrain from raising its current short-term interest rate target of -0.1%. 

However, Nagahama, a Dai-ichi Life Research Institute economist, mentioned that removing the 0.5% cap on the 10-year bond yield would not severely harm the economy as long as low short-term borrowing costs are maintained. 

USD/JPY key events today

The US will release key GDP data showing whether the economy grew in the first quarter. Investors will also watch initial jobless claims and pending home sales reports from the US for more economic insight.

USD/JPY technical forecast: Bulls nearing 140.00 key mark

USD/JPY technical forecast
USD/JPY technical forecast chart

USD/JPY has finally crossed above the 139.00 resistance level. This break saw the price make a higher high and is now trading slightly below the 140.00 key level. The bullish bias is stronger because the price is farther away from the 30-SMA. 

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Furthermore, bullish momentum is strong as the RSI trades near the overbought region. However, a bearish divergence has occurred between the RSI and the price. Although bulls are in charge, they have weakened, and therefore the price could pull back and break below the SMA to retest 137.75.

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