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  • US inflation increased less than expected in November.
  • Powell maintained a hawkish tone after the FOMC meeting.
  • Markets are expecting the BoJ to maintain its dovish stance.

The USD/JPY weekly forecast is slightly bullish as the BOJ is set to remain dovish after the Fed ended 2022 on a hawkish note.

Ups and downs of USD/JPY

There was a lot of volatility for USD/JPY in the past week as the US released inflation data and the Federal Reserve raised rates.

According to data, the US consumer price index increased less than anticipated in November, which increased anticipation that the Federal Reserve would reduce the pace of rate hikes following its two-day meeting on Wednesday.

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The Fed’s policy-setting committee increased its benchmark overnight interest rate by half a percentage point and predicted it would keep increasing to above 5% in 2023. Powell told reporters that recent indicators of reducing inflation have yet to give any confidence that the battle has been won.

Next week’s key events for USD/JPY

Although no change is anticipated at the Bank of Japan’s meeting on Tuesday, some market participants have started to wager on modest adjustments to stimulus as Governor Haruhiko Kuroda prepares to leave in April.

The Bank of Japan will likely maintain its ultra-low interest rates and dovish guidance, demonstrating.

The BoJ’s decision, which will come after the US Federal Reserve’s most recent interest rate increase on Wednesday, will solidify its position as a dovish outlier in a sea of counterparts who are continuing to tighten monetary policy to combat rising inflation.

USD/JPY weekly technical outlook: Bulls are up against the 22-SMA resistance

USD/JPY weekly forecast

In the daily chart, USD/JPY trades at a pivotal level. The price has touched the 22-SMA resistance and the 137.75 key level. The RSI is trading below 50, showing that the trend is bearish.

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The bearish trend paused at the 134.03 support level, where bulls came in for a short rebound. This rebound has gone up to a strong resistance zone, and the price might bounce lower in the coming week.

Bears will likely take over at this level and take out the 134.03 support before heading for 130.55 support. However, there is a chance the bearish trend will reverse next week. Bulls have shown some strength and might break above the 22-SMA and make higher highs and lows.

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