- USD/JPY’s bullish move has stalled at 131.00, where it could break above or push lower.
- The Bank of Japan has maintained its dovish sentiment, saying a weak yen could be good.
- The RSI shows a bearish divergence in the charts.
The USD/JPY price is pushing lower on Monday after a bullish close on Friday. Friday’s bullish move could continue owing to the stronger dollar and the dovish BoJ. Today’s move lower could be investors taking profits and waiting for other buyers to join the market and push the price past the 131.00 resistance.
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On Monday, Bank of Japan Governor Haruhiko Kuroda said that the central bank’s top task was to support the economy by maintaining a “powerful” monetary stimulus. This statement is because Japan is not facing inflation pressures like the US and Europe. Inflation in Japan remains modest and is only driven by short-term factors like expensive raw materials.
“Japan is not in a situation that warrants monetary tightening, as the economy is still recovering from the pandemic’s impact,” Kuroda said.
The Ukraine war has pushed up the price of raw materials, and Japanese households are getting used to the higher prices. On the weaker yen, Kuroda stated that while the currency’s decline hurts households and retailers, it attracts overseas tourists as the country re-opens.
“As long as the moves are stable and not very sharp, a weak yen, in general, is likely to impact Japan’s economy positively,” Kuroda said.
USD/JPY key events today
The USD/JPY investors do not expect much from the US. However, there will be some attention to Japan, releasing household spending data later in the day. This data will measure the change in consumers’ inflation-adjusted value of all expenditures.
USD/JPY price technical analysis: Bearish RSI divergence
Looking at the 4-hour chart, we see that prices are trading above the 30-SMA, showing bulls are in charge of this market. However, RSI shows weakness in the uptrend due to a bearish divergence. This divergence could push prices lower.
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The 131.00 is a stiff level to break as it has been held on previous occasions and caused the price to push lower. The bulls will have to gather more momentum to break through this level. If they fail, we might see the price break below the 30-SMA and start a downtrend.
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Saqib Iqbal
