- The BOJ unexpectedly opted to allow long-term rates to swing 50 basis points on each side.
- The currency market is still processing the BOJ’s change in policy.
- The yen could keep rising shortly as investors anticipate bigger changes.
On Wednesday, the USD/JPY price analysis turned slightly positive as traders digested the decision to modify its program for controlling bond yields and perhaps pave the way for a shift away from its ultra-easy monetary policy.
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The BOJ unexpectedly opted to allow long-term rates to swing 50 basis points on each side of its 0% target on Tuesday rather than the previous 25 basis point range. The central bank maintained its negative interest rates.
Early on Wednesday, the Japanese yen fell 0.26% against the dollar to 132.06 per dollar, although it was still close to its four-month high of 130.58 per dollar, which it had reached on Tuesday as it surged 3.8% higher.
According to Carol Kong, a currency analyst at the Commonwealth Bank of Australia, the currency market is still processing the BOJ’s change in policy.
She noted that the yen could keep rising shortly and that the market had taken the move as a step towards an eventual turnaround from the current ultra-dovish monetary policy.
The BOJ’s decision comes amid investor anxiety over a faltering global economy, extremely high inflation, and other central banks’ plans to raise interest rates. Global investors have been banking on the central bank changing its policies, and they will wager more on bigger changes.
USD/JPY key events today
Investors will pay attention to the existing home sales report from the US and the CB consumer confidence report from the US. Consumer Confidence gauges how confident consumers are about the state of the economy. It is a leading indicator since it can forecast consumer spending.
USD/JPY technical price analysis: A short pause at the 130.55 support
Looking at the above chart, we see the price is rebounding after a big bearish move. This move saw the price breaking support levels and making a new low. The price has paused at 130.55, with the RSI in the oversold region, which allowed bulls to return for a retracement of the recent move.
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The price is trading firmly below the 30-SMA showing the trend is bearish. Therefore, the pullback might pause at the 132.50 level before bears take over again.
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Saqib Iqbal
