- Today, the Japanese yen traded around 151.70 yen to the dollar after experiencing sharp swings earlier in the session as the Bank of Japan raised interest rates to 0.25%, confirming market speculation amid efforts to normalize monetary conditions.
- Also, BOJ said it would reduce its monthly bond purchases to around 3 trillion yen per month in the first quarter of 2026.
- Furthermore, the BOJ added that if expectations for economic activity and prices materialize, it will continue to raise interest rates and adjust the degree of monetary easing.
- Overall, the BOJ has been under constant pressure to raise rates amid risks that a weak yen could lead to higher inflation.
On the economic data front, Japan’s retail sales growth hit a four-month high in June, while industrial output fell less than expected.
Externally, the US Federal Reserve and the Bank of England will also decide on monetary policy this week.
Also in today’s trading, the FOMC decision could steal the show, as the Fed is widely expected to sit back while signaling that a September rate hike is more likely. However, downplaying the chances of monetary policy easing could bring a rally to the US dollar, especially if the US non-farm payrolls report later in the week comes in stronger than expected again.
However, leading US jobs indicators could also influence the behavior of the USD/JPY pair in the coming days, as traders try to adjust their positions ahead of these key events.
On the stock trading platforms front, US stocks fall as chip stocks retreat. According to trading, US stocks erased early gains as declines in chip-heavy stocks weighed on technology-exposed equity indices, while markets assessed the latest data and prepared for the Federal Reserve’s policy decision today. Furthermore, the Nasdaq 100 closed down 1.3%, hitting its lowest level in nearly two months, while the S&P 500 fell 0.5%. Meanwhile, Nvidia dropped 7%, triggering broad selling pressure on other semiconductor giants and extending a period of weakness in the sector as investors question the sustainability of the rise in artificial intelligence and shift their focus to more traditional sectors of the U.S. economy.
Microsoft dropped 0.9% ahead of its earnings release after the closing bell, while Apple, Alphabet and Meta saw muted activity ahead of their reports later in the week. On the earnings front, Merck fell 9.8% and Procter & Gamble dropped 4.8% after their results, respectively. Still, the Dow Jones rose 205 points, extending its lead over its tech-heavy peers, supported by banks and insurance companies.
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USD/JPY Technical Analysis and Expectations Today
The USD/JPY price action is stalling its recent decline as the price forms reversal candles around a visually significant area on the daily time frame. Technically, the price finds support at the 38.2% Fibonacci retracement level around 153.65 and could be on the verge of a rebound to a high of 162.00 if the support holds. Furthermore, a bigger pullback could reach the 50% Fibonacci level at the key psychological mark of 151.00 near the dynamic support of the 200 simple moving average or the 61.8% level closest to the uptrend line that has held since April 2023
As for moving averages, the 100 simple moving average is above the 200 simple moving average to confirm that the strongest path is to the upside or that support is likely to hold rather than break. Stochastic is also in the oversold zone reflecting exhaustion among sellers, so a turn higher would confirm the return of bullish momentum. Also, the RSI appears to have bottomed out around the oversold zone and has plenty of room to rise before reflecting exhaustion among buyers.
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