- The yen fell by 1.7% on Friday due to the BOJ’s decision to maintain its monetary policy.
- First Republic Bank will likely be the third big US bank to fail in two months.
- Smaller local Japanese businesses are being pushed to raise pay amid rising living costs.
Today’s USD/JPY outlook is bullish. On Monday, the Japanese yen declined, extending its post-BOJ decline. The yen fell 1.7% on Friday due to the Bank of Japan’s (BOJ) decision to maintain its monetary policy. It was the biggest decline since early February.
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According to reports on Saturday, First Republic Bank will likely be the third big US bank to fail in two months. US regulators were selling the bank over the weekend. First Republic’s acquisition would come less than two months after the death of Silicon Valley Bank and Signature Bank.
Smaller local Japanese businesses are being pushed to follow their larger counterparts in raising pay. This is due to rising inflation and a worsening labor shortage. It could result in broader salary increases, persuading the central bank to reduce its enormous stimulus program.
Since the bubble burst in the 1990s, wages in Japan have mostly remained unchanged. However, they have recently started to rise due to pressure on businesses to keep up with the rising cost of living.
For BOJ policymakers, a sustained wage increase is a key factor. Before beginning to reduce monetary stimulus, they aim to promote stable demand-driven inflation.
USD/JPY key events today
Investors will get a picture of the state of manufacturing activity in the US. Further decline in the ISM manufacturing PMI could lead to a drop in the US dollar.
USD/JPY technical outlook: Stiff resistance at 137.25
USD/JPY has made a sharp bullish move in the 4-hour chart. The bias is bullish because the price trades far above the 30-SMA. At the same time, the RSI is well within the overbought region. Bulls became stronger after the price found support at the 133.50 level.
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Since then, the price has broken above key resistance levels without pausing. It is a sign of a strong bullish move. However, with the RSI at the overbought level, bears might return near the 137.25 level to retrace the recent move. This would likely lead to a pullback before the uptrend continues.
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Saqib Iqbal
