USD/JPY Outlook: Bulls Hit 131.00 as BoJ Doubles Bond Purchases

USD/JPY Outlook: Bulls Hit 131.00 as BoJ Doubles Bond Purchases

  • A surge of over 1% pushed the USD/JPY above 130.00.
  • A doubled bond purchase rate by the Bank of Japan breaks the yen.
  • As the Fed prepares to raise rates in May, attention turns to the US GDP report.

The USD/JPY outlook remains strongly bullish as the Fed-BoJ divergence widens in favor of the bulls. The market is pricing in a 50-bps rate hike by the Fed.

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The USD/JPY price crosses 130.00 for the first time in over 20 years as bullish momentum accelerates.

After the Bank of Japan (BOJ) maintained its ultra-loose monetary policy and doubled its asset purchases, the yen’s slide deepened.

To protect the yield cap of 0.25% on 10-year Japanese Government Bonds (JGB), the central bank pledged to buy fixed-rate bonds every business day.

The Fed is still targeting a double rate hike at its meetings in May and June, and the dovish BoJ stance widened the gap between the US and Japanese yields.

Due to the Russian gas producers’ blackmail, the US dollar rose despite the energy turmoil in Europe, which weighed heavily on the euro. This is because some EU gas producers want to accept Russian ruble payments.

While investors seek refuge in the ultimate hedge – the US dollar – the Chinese lockdown and its impact on the global supply chain and economic growth is keeping them on their toes.

What’s next to watch for the USD/JPY outlook?

As a result, traders favor holding the US currency before releasing US Q1 GDP data, which could show a slowdown in the world’s largest economy. A negative report could reignite recession fears by bolstering the dollar as a safe-haven asset.

Focus remains on Bank of Japan Governor Haruhiko Kuroda’s press conference because it offers a fresh perspective on the yen’s decline.

USD/JPY price technical outlook: Bulls ready to jump further

usd/jpy outlook

The USD/JPY price is wobbling around the multi-year highs below the 131.00 mark. The pair looks buoyant to post fresh highs if the momentum sustains. The price has the potential to hit the 135.00 mark. The 20-period and 50-period SMAs on the 4-hour chart are converging, which shows a strong bullish bias.

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Alternatively, the pair may see a meaningful downside correction as it has already been overbought. In such a scenario, the pair may slide back towards yesterday’s lows around 127.00 ahead of 125.00.

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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.