- At the start of trading today, Wednesday, USD/JPY is hovering bullishly around the 157.92 resistance level.
- The yen had gained some support from data showing stronger-than-expected Japanese export growth in May amid a weak yen and strong external demand.
Bank of Japan Governor Kazuo Ueda told the Japanese parliament earlier this week that they may raise interest rates again at the July meeting depending on upcoming economic data. Also, he warned that higher import costs caused by a weaker yen could weigh on household spending, but added that higher wages could boost consumption.
Last week, the Bank of Japan kept interest rates unchanged as widely expected, and said it would release a plan to reduce its bond-buying program at its next policy meeting in July. The yen fell sharply and approached three-decade lows after the decision, before paring those losses as market participants shifted their focus to the expected reduction in bond purchases and the possibility of more currency intervention.
According to the economic calendar, the Bank of Japan unanimously kept its key short-term interest rate at around 0% to 0.1% at its June meeting, as widely expected, after raising rates for the first time since 2007 and ending eight years of negative interest rates in March. At the same time, the governing board indicated that it may consider how to start reducing bond purchases at its July meeting. Clearly, the move was approved by an 8-1 vote, with board member Nakamura Toyoaki opposing, with the aim of allowing longer-term interest rates to move more freely.
In general, the Bank of Japan is currently buying around 6 trillion yen of bonds per month. The Friday statement said the Japanese economy had recovered moderately despite some areas of fragility. Private consumption had been resilient amid improving corporate profits and business spending. However, exports remained flat, as did public investment. On the inflation front, annual figures were in the 2 to 2.5% range, with inflation expectations rising modestly. Meanwhile, the core consumer price index is expected to rise gradually.
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USD/JPY Technical Analysis and Expectations Today
The general trend for USD/JPY remains bullish and may remain so until Japan intervenes in the forex markets to prevent further collapse of the currency exchange rate. Now, all eyes are on the psychological resistance level of 160.00 in case bulls move the currency pair towards the resistance levels of 158.30 and 159.00 respectively. According to the performance on the daily chart, breaking the current channel requires moving below the 155.00 level. Today is a US holiday, so the currency pair is expected to move in narrow ranges while maintaining the current upward trend.
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