- No major changes in policy are expected from global central banks this week.
- Starting with the Bank of Japan on Tuesday, it is likely to continue with its slow pace of preparation for a shift to a more hawkish stance later this year.
- Moreover, any expectations of a major policy announcement were dashed by the Japanese earthquake.
- Obviously, this explains the weak performance of the yen in January and is a major factor in the strong rise in the Nikkei index.
- It is now rapidly approaching its all-time high, which dates to 1990.
- However, with the bank's announcement today, the pace of gains in the USD/JPY, which had reached the resistance level of 148.55 before the announcement, reversed to the support level of 146.97 and is stabilizing around the 147.48 level at the time of writing the analysis.
Ultimately, it is likely that this year will see the dismantling of the Bank of Japan's control over the yield curve, which has kept long-term yields stable, as well as the first rate cut for the bank. However, there is no rush and no real pressure now that inflation has returned to normal. Also, the question facing traders is whether the USD/JPY has reached its 2022 peak of 151.94, or whether it can continue as the Bank of Japan withdraws its foot more. Currently, the pair is trading at 148, and with gains of 4.8% in January, a breakthrough for the USD/JPY and a new all-time high for the Nikkei index seem likely.
According to forex market trading, the Japanese yen shook off the initial swing and advanced after Bank of Japan Governor Kazuo Oida said that certainty in the outlook is gradually increasing. As a result, the Japanese currency rose as much as 0.8% to 146.99 against the dollar as Oida spoke at a press conference on Tuesday. Recently, the central bank earlier kept its monetary policy settings unchanged. As a result, futures for Japanese government bonds with a standard 10-year maturity fell 40 points to 146.59 as of 4:16 p.m. in Tokyo.
Meanwhile, the yen's gains come after widespread downward pressure on the currency this year amid expectations that a rate hike is still months away. The swap market was calculating a 45% probability of a rate hike by the Bank of Japan's April meeting as Oida spoke, with the probability rising to 100% by the July meeting. Historically, the yen had reached its lowest level since late November last week. Moreover, it remains the worst-performing among its major peers so far this year.
Furthermore, the Japanese government has warned against excessive movements in the currency, with Finance Minister Shunichi Suzuki saying on Friday that the government is closely monitoring market movements and that it is important for its fundamentals and trading to be stable.
USD/JPY Technical Analysis and Expectations Today:
According to the performance on the daily chart above, the general trend for the USD/JPY pair is still upward. Technically, by breaking the resistance at 148.60 will support the next stronger upward move, the psychological peak at 160.00, and with the Japanese central bank’s decision today, our view of the currency pair to buy from every falling level will be confirmed. Currently, the closest support levels for the currency pair are 146.80 and 145.70, respectively. Moreover, after the Japanese Central Bank's announcement this morning, the USD/JPY is not anticipating important American economic data. Therefore, investor sentiment, whether or not to take risks, will have the strongest impact on the performance of the currency pair.
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