Today, all currencies against the Japanese yen will be in a waiting mode for the Japanese Central Bank to announce an update on its monetary policy. In the case of the currency pair, “USD/JPY”, it is trying to rebound upwards with gains that reached the resistance level of 143.10. recently, USDJPY was stable around it at the time of writing the analysis, recovering from the losses of the recent strong selling operations. Technically, it reached the support level of 140.95, which was subsequently moved considering a sudden shift by the Central Bank of Japan that it is ready to abandon negative interest rates after a long wait.
Meanwhile, the Bank of Japan has started a two-day meeting where investors are watching for any hints of a change in the interest rate policy that the Bank of Japan has been pursuing for a long time, keeping rates near zero. Generally, investors have speculated for months that rising prices might prompt the Bank of Japan to finally shift away from its accommodative monetary policy. However, the meeting ending today, Tuesday, is not expected to result in a significant change.
Today, the Bank of Japan has kept its benchmark interest rate at negative 0.1% for ten years, hoping to stimulate investment and borrowing to help drive strong, sustainable growth. One goal is to bring inflation to 2% after many years of falling prices. Moreover, while inflation rose, wages failed to keep pace, and BoJ Governor Kazuo Ueda remained cautious about major moves at a time of deep uncertainty about the global economic outlook.
On the other hand, stock markets rose in general last week after it appeared that the US Federal Reserve gave a signal of hope that it had finished raising US interest rates and would begin lowering them in the new year. obviously, Low interest rates not only boost the prices of all types of investments, but they also relieve pressure on the economy and the financial system.
Recently, The Federal Reserve's goal was to slow the economy and reduce investment prices enough through high-interest rates to control inflation. It would then have to ease off the brakes at just the right time. If it waited too long, the economy could fall into a painful recession. Contrarily, if it moved too early, inflation could accelerate again and add hardship for everyone.
Furthermore, inflation peaked in June 2022 at 9.1%, the most painful inflation Americans have experienced since 1981. Shortly, a preliminary report on Friday indicated that business activity growth in the United States of America may rise. Also, the report pointed to “more flexible financial conditions,” which is another way of describing market movements that could encourage companies and individuals to spend more. For its part, the Congressional Budget Office said on Friday that it expects inflation to roughly reach the Federal Reserve's target rate of 2% in 2024, with overall growth slowing. Finally, unemployment rates are expected to rise until 2025, according to updated economic forecasts for the next two years.
USD/JPY Technical analysis and Expectations Today:
Based on the performance on the daily chart below, the exchange rate of the US Dollar against the Japanese Yen “USD/JPY” continues to maintain the downward channel trajectory. Nearby, breaking the initial support of this channel will not occur without settling above the resistance at 146.60. On the other hand, during the same time frame, moving towards the support level of 141.60 will be significant for the preparation of stronger bearish momentum towards the psychological support at 140.00, respectively. Currently, these movements depend on the reaction to today's announcement by the Bank of Japan and its signals regarding the future tightening of its policy followed by the reading of the preferred U.S. inflation by the Federal Reserve at the end of the week.
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