- As we predicted at the start of trading this week, the price of the USD/JPY pair is likely to remain in a neutral and narrow range in its current uptrend until the markets and investors react to the announcement of the US Federal Reserve and US employment figures.
- Yesterday, the price of the USD/JPY remained in the range of 147.25 to 148.33 and is stable around 147.48 at the start of the Tuesday trading session.
On another note, the Bank of Japan will exit its ultra-loose monetary policy as soon as the Federal Reserve begins to cut US interest rates. Thus, this is leading to yen gains and higher sovereign bond yields this year, according to hedge fund manager Stephen Jen.
Furthermore, the yen is likely to rise to 130 yen per dollar this year, while 10-year Japanese government bond yields may rise to 1.5%-2%, wrote Jin, CEO of Eurizon SLJ Capital Ltd. BoJ Governor Kazuo Ueda's focus will be on resetting monetary policy “to positions that allow the Bank of Japan to maneuver while avoiding pricking the Japanese government bond bubble,” according to Jin, who is known for his work on the “dollar smile” theory on the US currency.
Steadily, traders have been increasing their bets on a more hawkish Bank of Japan after Kuroda said last week that confidence in the bank's price expectations is gradually increasing, a necessary precondition for policy adjustment. Moreover, a rate hike would be another sign that the world's third-largest economy is emerging from a long period of demand slowdown.
Moreover, the analyst added that given the fragile state of many Japanese banks and the fact that people have become accustomed to very low interest rates, the Bank of Japan is likely to ease its yield curve control program when inflation in Japan slows, rather than tightening policy in response to rising inflation. He added that the Bank of Japan is likely to move to a zero-interest rate policy from the current negative rates and ease YCC when the US Federal Reserve begins to cut interest rates because that "will provide the greatest level of calm to the Japanese government bond market."
USD/JPY Technical Analysis and Expectations Today:
According to the performance on the daily chart above, the price of the dollar currency pair against the Japanese yen (USD/JPY) is moving in narrow ranges on its upward path. Obviously, this performance heralds an upcoming strong movement in one of the two directions, and this will depend on the reaction from the US Central Bank’s announcement first, then the US job numbers announcement by the end of the week. So far, the general trend of the USD/JPY pair is upward, and breaking the resistance 148.75 will support the move towards the psychological resistance 150.00, respectively. On the other hand, over the same period, the move towards the support level of 145.80 will be a first break of the current upward trend.
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