- The Bank of Japan’s recent adjustments to its yield curve control policy put pressure on the yen.
- US banks tightened credit standards during the second quarter.
- Investors expect data from the US, including the ISM manufacturing PMI and the JOLTs job openings.
Today’s USD/JPY outlook is bullish. On Tuesday, the yen declined to a three-week low due to the Bank of Japan’s recent adjustments to its yield curve control policy. The move put pressure on the currency.
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Since Friday, the Asian currency had experienced significant fluctuations when the BOJ signaled a gradual departure from extensive monetary stimulus. Moreover, the central bank announced it would purchase 10-year Japanese government bonds at a fixed rate of 1.0%.
This adjustment aligned Japan with other major central banks aggressively tightening monetary policy to combat surging inflation. Consequently, the bank is moving away from decades of aggressive stimulus to revitalize economic growth.
Carlos Casanova, a senior Asia economist at UBP in Hong Kong, suggested that markets might assess the BOJ’s flexibility in the coming months. The subtle changes indicate the possibility of modifying the YCC target in 2023. Furthermore, he added that broadening the YCC band by 1% makes sense, given it’s the new line in the sand.
Elsewhere, data from the Federal Reserve’s quarterly Senior Loan Officer Opinion Survey (SLOOS) revealed that US banks tightened credit standards. Additionally, they observed weaker loan demand from businesses and consumers during the second quarter.
The survey also indicated that banks anticipate further tightening standards for the remainder of 2023. This provides additional evidence of the impact of rising interest rates on the economy.
USD/JPY key events today
Investors expect key data from the US, including the ISM manufacturing PMI and the JOLTs job openings. These will give clear pictures of the manufacturing sector and the labor market.
USD/JPY technical outlook: Bulls bouncing off key support at 142.05.
On the charts, USD/JPY has pushed higher after retesting the 142.05 key level as support. The bias is bullish as the price trades far above the 30-SMA, and the RSI is nearer the overbought region.
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Furthermore, the price has confirmed a bullish trend by making a higher high above 142.05. Therefore, bulls will likely send the price higher toward the next hurdle at 144.02. A bullish bias will remain with the price above 30-SMA and the RSI above 50.
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Saqib Iqbal
