In the last two trading sessions for the past week, the price of the USD/JPY currency pair moved amid attempts to bounce back with gains towards the level of 138.17. This happened before closing trading stable around the level of 136.70. The bounce came after the price of the currency pair fell towards the support level of 134.51. USD/JPY is still searching for strong motivating factors to return to the vicinity of the psychological resistance 140.00. This will avoid more strength of the current general bearish trend.
This week, the Bank of Japan is widely expected to stick to negative interest rates that set it apart from other major central banks in the world. In the decision scheduled for Tuesday, BoJ Governor Haruhiko Kuroda will reiterate his out of sync stance that monetary stimulus must remain in place to secure lasting inflation. This is in contrast to the hawkish language on rates and interest rates that has dominated the global central banking landscape over the past week, even as the Federal Reserve, European Central Bank and Bank of England opted for lower hikes than before.
Overall, all 47 economists surveyed by Bloomberg expected no change in the Bank of Japan's policy settings, including a 0.25% cap on 10-year yields. After a decade of trying to generate inflation in an economy known for its entrenched price weakness, Kuroda is determined to continue the stimulus in the remaining months of his term. Japan's inflation rate is at its highest level in four decades, but it is quieter than in the United States and Europe. Figures released on Friday are expected to show that Japan's core inflation is slowly rising towards 4%, but Kuroda is waiting for signs of wage growth to reinforce the price trend, which he says remains driven by rising commodity prices and a weaker yen.
Speculation among investors and BoJ watchers will focus on the policy path after Kuroda steps down in April.
BoJ officials see the possibility of a policy review in 2023 after examining the momentum of wage growth and the extent of the global slowdown, people familiar with the matter said earlier this month. Revisions in the past have made adjustments, including a switch to yield curve control. Until then, the world's last prop of low interest rates is set to remain in place.
Technical expectations for the dollar pair against the Japanese yen today:
- According to the performance on the hourly chart, it appears that the USD/JPY is trading within a descending channel formation.
- This indicates significant short-term bearish momentum in market sentiment.
- Therefore, the bears will look to extend the current declines towards 136.21 or below to the support 135.66.
- On the other hand, bulls - will target short-term profits around 137.099 or higher at 137.62 resistance.
It appears that the USD/JPY currency pair is also trading within the formation of a descending channel. This indicates a significant long-term bearish momentum in market sentiment. Therefore, the bulls will target the long-term profits at around 139.11 or higher at the resistance at 141.16. On the other hand, the bears will look to pounce on the gains at around 134.57 or below the support at 132.41.
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