- According to forex trading, the Japanese yen was the main loser, falling by more than 1.5%, even after the Bank of Japan's historic decision to end eight years of negative interest rates and completely abolish the yield curve control policy.
- As a result, the USD/JPY pair moved with strong upward momentum, reaching the resistance level of 151.81.
- This is a level that has often been talked about as being close to Japanese intervention in the markets to prevent the Japanese yen from collapsing further.
Currently, the USD/JPY currency pair is trading around 150.89 at the time of writing the analysis, as the US dollar's gains stopped after the US Federal Reserve's announcement yesterday.
However, with reports already preparing investors for the fact that policymakers may decide to press the Japanese rate hike button at this meeting. The decision was not a surprise, while the bank's announcement that it will continue to buy government bonds at the same amounts as before amounts to giving up control of the yield curve but not such physical change. Also, BOJ Governor Kuroda's remarks that they will maintain accommodative monetary policy conditions, the meeting's decisions did not add any additional hawkishness to the market's perception.
Investors continued to believe that any subsequent rate hikes are likely to be gradual and very slow, with many members telegraphing ahead of the meeting that they saw an 83% chance of a 10-basis point rate hike in September. For the Japanese yen to reverse course and start a long-term recovery, data and headlines may need to start signaling that another rate hike may be appropriate sooner than the market expects. Otherwise, further declines could lead to another round of verbal intervention by Japanese officials.
In other news, Federal Reserve officials on Wednesday signaled that they still expect to cut the US key interest rate three times in 2024, pushing up interest rates on Wall Street, despite evidence that inflation remained high early in the year. Concurrently, officials have left the benchmark interest rate unchanged for the fifth consecutive time. Speaking at a press conference, Fed Chairman Jerome Powell said the surprise surge in inflation in January and February did not fundamentally change the Fed's picture of the economy, “the Fed still expects inflation to continue to slow, notwithstanding more gradually than it thought three months ago”.
USD/JPY Technical analysis and Expectations Today:
Despite the halt in gains for the US dollar following the Federal Reserve announcement, the overall upward trend for the USD/JPY pair remains intact. Based on the performance on the daily chart attached, there will be no break in the upward trend without bearish movement towards the support levels at 149.45 and 148.00, respectively. Technically, the psychological resistance at 150.00 continues to support bullish dominance. Today, the USD/JPY pair will react to market and investor response to the Federal Reserve announcement, along with the release of the weekly US jobless claims and readings of the Philadelphia Industrial Index and the Purchasing Managers' Index for the manufacturing and services sectors in the United States.
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