- BoJ interest rate decision due during Tuesday market session.
- BoJ press conference and Q4 outlook report to draw trader focus.
- Japan Tokyo inflation due later this week, on Friday.
The USD/JPY cycled around the 148.00 handle on Monday as traders gear up for the Bank of Japan’s (BoJ) latest rate statement on Tuesday, coming ahead of another round of Japanese inflation figures slated for Friday with the Tokyo Consumer Price Index (CPI).
Bank of Japan Preview: Forecasts from eight major banks, BoJ to maintain the status quo and remain dovish
The Bank of Japan is firmly entrenched in a hyper-easy policy stance, and markets don’t expect much movement on interest rates from the Japanese central bank anytime soon as BoJ policymakers continue to fret about Japanese inflation which is expected to possibly slump below their 2% target at some point in the future.
The BoJ’s own inflation outlook forecasts Japanese inflation declining below 2% sometime in 2025, and it will take a significant shift in Japanese economic figures to pushy the BoJ out of its current negative rate regime.
Despite this, investors will be watching the BoJ’s press conference on Tuesday closely; BoJ Governor Kazuo Ueda recently hinged the end of negative rates on wage increases in Japan during 2024’s first quarter.
MUFG: JPY could weaken further barring a stronger signal that rates could be raised in spring
Elsewhere on the data docket for this week, US Purchasing Managers’ Index (PMI) figures are due Wednesday and are expected to hold steady at 47.9 for the manufacturing component in January, while the services sector PMI is forecast to fall back slightly from 51.4 to 51.0 in the same period.
The US will also see fourth-quarter Gross Domestic Product (GDP)< which is expected to decrease from 4.9% to 2.0% on an annualized basis, while Friday brings a fresh round of Tokyo CPI inflation, with YoY Tokyo Core CPI expected to slip from 2.1% to 1.9% in January.
USD/JPY Technical Outlook
The USD/JPY finds itself mired on the 50-hour Simple Moving Average (SMA) near the 148.00 handle as near-term momentum drains out of the pair. Intraday technical support sits at the 200-hour SMA near 146.75, and short-term traders will note a hard line drawn under the 147.75 price level after last week’s climb into the 148.50 neighborhood.
Daily candlesticks have the USD/JPY temporarily frozen as candles spin in place at the top end of a 6% climb from December’s swing low into 140.25.
The 200-day SMA is providing rising support near 144.00, and near-term gains in the pair leave the USD/JPY on the high side of a declining 50-day SMA near 146.00.
USD/JPY Hourly Chart
USD/JPY Daily Chart![]()
The Bank of Japan (BoJ) is one of the most influential central banks in the world, playing a crucial role in the stability and performance of the Japanese economy. With the recent economic developments in Japan, the BoJ’s upcoming rate call has been the center of attention in the financial world. In particular, the USD/JPY pair has been hovering around the 148.00 mark, awaiting the BoJ’s decision and its impact on the currency pair. Traders and investors alike are getting ready for the next move of the BoJ, looking for potential opportunities in the currency markets. In this article, we will discuss the factors that are influencing the BoJ’s decision, the current status of the USD/JPY pair, and what traders can expect in the upcoming days.
Factors Influencing the BoJ’s Decision
The current macroeconomic environment in Japan is a mixed bag, creating a dilemma for the BoJ’s monetary policy decision. On one hand, Japan’s GDP growth has been steadily recovering, with the latest reading showing a growth rate of 12.7% in the second quarter of 2021. This is a substantial improvement compared to the contraction of 5.4% in the previous quarter, indicating a strong rebound from the initial impact of the pandemic. On the other hand, the ongoing pandemic situation and the Hamamatsu ruling, which restricts businesses from operating beyond 8 PM to prevent the spread of COVID-19, could derail the recovery and pose a downside risk to the economy. Considering these factors, the BoJ has a tough decision to make in its next rate call.
In addition to the domestic factors, the BoJ also needs to take into account the global economic situation. The US Federal Reserve’s decision to taper its bond-buying program and the rising inflationary pressures in the US could have a ripple effect in the Japanese economy. Moreover, the ongoing trade tensions between the US and China and the geopolitical risks in the region could also influence the BoJ’s decision. As Japan heavily relies on exports, any disruption in international trade could harm its economy, causing concerns for the BoJ.
Current Status of the USD/JPY Pair
The USD/JPY pair has been trading in a tight range, hovering around the 148.00 level, in anticipation of the BoJ’s next rate call. The pair has been mostly range-bound since the beginning of August, with no clear direction. The recent mixed economic data from Japan and the US, along with the global uncertainties, have kept the pair from making a decisive move. However, the pair is showing signs of a bullish bias, as the US dollar gains strength against other major currencies and the Japanese yen remains under pressure due to the pandemic and the ongoing political uncertainties.
Looking at the technical aspect, the daily chart shows the pair trading above both its 50-day and 200-day moving averages, indicating a bullish bias. However, the momentum seems to be slowing down, with the pair struggling to break through the 148.50 resistance level. A break above this level could open doors for further gains, with the next target at the 150.00 psychological level. On the flip side, if the BoJ’s decision and a possible risk-off sentiment in the market push the pair lower, the immediate support level can be found at 146.00, followed by the 145.00 level.
What to Expect in the Upcoming Days
Traders are eagerly waiting for the BoJ’s next rate call, which is scheduled for September 21. The market sentiment towards the Japanese yen could shift significantly depending on the central bank’s decision. The BoJ might continue with its current monetary policy, keeping the interest rates unchanged at -0.1% and maintaining its yield curve control target at 0%. However, there is also a possibility that the BoJ might decide to take some preemptive measures, considering the uncertainties surrounding the economy. Such a move could cause volatility in the currency markets, especially in the USD/JPY pair.
Additionally, traders should also closely monitor any developments on the global front, as any major shifts in the market sentiment could have a spill-over effect on the USD/JPY pair. The ongoing China-US trade tensions, concerns surrounding the Chinese property sector, and any potential surprises from the Federal Reserve could all increase volatility in the currency market and have an impact on the USD/JPY pair.
Benefits and Practical Tips for Traders
With the current market conditions and the upcoming BoJ’s rate call, there could be significant opportunities for traders in the USD/JPY pair. Here are some key benefits and practical tips that traders should keep in mind:
– Volatility: As the market awaits the BoJ’s decision, volatility in the USD/JPY pair is expected to increase. Traders can take advantage of this volatility by using technical analysis and identifying key support and resistance levels to enter trades.
– Diversification: The USD/JPY pair is considered a safe-haven currency pair, which is less prone to extreme volatility compared to other currency pairs. Including this pair in a diversified portfolio can help manage risk and provide stability during turbulent market conditions.
– Keeping an eye on the news: Traders should closely follow any news or developments surrounding the BoJ’s decision and the global economic situation. This can help them anticipate potential market movements and make informed trading decisions.
Conclusion
The BoJ’s next rate call and its impact on the USD/JPY pair are closely watched by traders and investors alike. With the current mixed economic conditions in Japan and the global uncertainties, the BoJ has a tough decision to make. The USD/JPY pair is currently hovering at 148.00, awaiting the central bank’s next move. Traders should keep a close eye on the BoJ’s decision and any developments in the global economic landscape to make the most out of potential opportunities in the currency market.
