- For four consecutive trading sessions, the price of the USD/JPY currency pair has moved in a rebound path to the upside, with gains that reached the resistance level of 133.88. It settled near that resistance at the time of writing the analysis.
- Its losses last week affected the support level of 130.62.
- The currency pair may remain on this path until the reaction from the announcement of US inflation numbers and the content of the minutes of the last meeting of the US Federal Reserve this week.
New Bank of Japan Governor Kazuo Ueda said he agreed with Japanese Prime Minister Fumio Kishida that there was no immediate need to revise the central bank's joint agreement with the government, after his first meeting with Kishida after he became president of the Bank of Japan.
"As a result of appropriate policy from both the Bank of Japan and the government, we are now in a situation where we are not in a recession," Ueda told reporters in Tokyo on Monday after a meeting with Kishida at the prime minister's office, "We agreed that the thinking behind the joint statement is appropriate, and there is no need for immediate review,” he added.
A 2013 agreement between the government and the central bank stipulated that the Bank of Japan would seek to reach the inflation target as soon as possible. Ueda's comments suggest that easy politics will continue. Kishida also said that the government and the Bank of Japan agreed to cooperate closely.
Accordingly, the markets remained relatively calm on Monday, with USDJPY trading around 132.10.
Kishida Ueda was named the first new BoJ president in a decade, meaning the first academic to hold the central bank's top job. He also inherited a massive easing program that saw $11.7 trillion in spending under former president Haruhiko Kuroda. Ueda indicated during the confirmation process in the Japanese Parliament after his nomination that he will continue monetary easing for the time being. This has led the market to focus more on how worried Ueda is about the growing side effects of massive easing and the deteriorating performance of financial markets.
The new governor has an opportunity to drop hints of any intention to change policy at his first news conference
In a sign that investors are protecting themselves against possible adjustments from the YCC, the 10-year Japanese bond yield rose again. This is in sharp contrast to other major economies, where there has been an easing of upward yield pressures in the wake of banking crises in the US and Europe. At the first parliamentary hearings for its approval in February, Ueda said his biggest responsibility was to make the right advocacy at the right time for policy as needed, whether that be a change toward normalization or sustained stimulus.
“If I am appointed governor of the Bank of Japan, my task is not to come up with some kind of magical special monetary policy,” Ueda said on February 24.
USD/JPY Technical Outlook:
Amid anticipation of US inflation numbers and US central bank signals, the USD/JPY currency pair is trying to form a bullish channel on the daily chart. It may succeed in its appearance if it settles above the resistance 135.00, and over the same time, the return of the currency pair towards the support level 131.40 will end the idea rebound. I still prefer to buy the currency pair from every downward level.
The 4-hour chart shows that the USD/JPY exchange rate has been in a downtrend after peaking at 137.93 on March 8th. It fell 4.5% from the highest point in March. The pair is still slightly below the 50-period moving average and is just above the 38.2% Fibonacci retracement level.
Therefore, the outlook for the USD/JPY pair is bearish, with the next reference level to watch at 129.70, the low point of March 24th. The bulls need to move toward the resistance level of 134.90 to confirm control of the trend.
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