USD/JPY Price Analysis: BoJ Unchanged Despite Rising Inflation

• The BoJ maintained its dovish stance by not raising rates despite market pressures.
• The BoJ increased its core inflation forecast for the current fiscal year to 2.9% from 2.3%.
• Core inflation in Tokyo hit a 33-year high of 3.4%.

Today’s USD/JPY price analysis is bearish as Japan fights to support the yen. However, this might change. Friday’s decision by the Bank of Japan to keep its ultra-low interest rates and its dovish guidance cemented its position as an outlier among central banks worldwide that is tightening monetary policy. The fundamentals are still pointing to more yen weakness.

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The BOJ increased its core consumer inflation forecast for the current fiscal year ending in March 2023 from a July estimate of 2.3% to 2.9% in new quarterly projections, considerably over its 2% target. As anticipated, the BOJ maintained its -0.1% target for short-term interest rates and its commitment to keep the yield on 10-year bonds near 0%.

Data released on Friday indicated that core consumer inflation in Tokyo, the capital of Japan, which is regarded as a leading predictor of national figures, hit a 33-year high of 3.4% in October, indicating expanding pricing pressure.

Due to the BOJ’s ultra-easy monetary policy, the yen has fallen sharply, increasing the price of expensive fuel and raw materials and forcing the government to intervene in the market to support the currency.

USD/JPY key events today

Investors are awaiting a BoJ press conference for clues on the future direction of monetary policy. The Personal Consumption Expenditure (PCE) price index and the pending home sales report are two US data points that investors will watch closely.

USD/JPY technical price analysis: Buyers retest 30-SMA resistance

Looking at the 4-hour chart, we see the price trading below the 30-SMA and the RSI below 50, showing bears are in control. The bearish trend was confirmed when the price broke below the 147.05 support and made a lower low.

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The price is looking to retest the 30-SMA as resistance, at which point bears might take over to continue the downtrend. With enough momentum, bears might take out the next support level at 145.01. If this happens, the price will collapse further. However, if the price breaks above the 30-SMA, the bullish trend might return.

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