- The US dollar continues to gain momentum against other major currencies since Trump’s victory in the US presidential election, while the Japanese yen was negatively affected by the Bank of Japan’s pause in tightening.
- Accordingly, USD/JPY bulls moved towards the 154.00 resistance level at the time of writing.
Weakening of the Japanese Yen with a Shift in the BOJ's Policy:
The Japanese yen has declined in the forex market after the minutes from the Bank of Japan's policy meeting in October revealed divisions among policymakers about the timing of future interest rate hikes. Some members had expressed concerns about global economic uncertainty and rising market volatility, especially regarding the depreciation of the Japanese yen. Despite these concerns, the central bank expected that it could raise the benchmark interest rate to 1% by the second half of the 2025 fiscal year.
Overall, the Japanese yen had already come under pressure last week as the US dollar strengthened in the wake of Donald Trump’s victory in the US presidential election. However, the Japanese yen managed to regain some ground after Japanese officials stepped up their verbal warnings against excessive declines in the yen. In this regard, on Friday, Japanese Finance Minister Katsunobu Kato said that Japan will take “appropriate measures” to address extreme volatility in foreign exchange rates.
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On the other hand, the yield on 10-year Japanese government bonds is stable at 1%. According to reliable trading platforms, the yield on 10-year Japanese government bonds remained around 1% on Monday as investors continued to gauge the outlook for the Bank of Japan's monetary policy. The minutes from the Bank of Japan's policy meeting in October revealed divisions among members about the timing of future interest rate hikes. While some members expressed concerns about global economic uncertainty and rising market volatility. Especially, regarding the yen, the central bank expected that it could raise the benchmark interest rate to 1% by the second half of the 2025 fiscal year.
Yields on Japanese government bonds rose last week, as the yen’s weakness fuelled speculation that the Bank of Japan could raise interest rates sooner to defend the currency. BOJ Governor Kazuo Ueda also recently noted that wages and prices are progressing in line with the bank’s expectations, suggesting that conditions may be ripe for further rate hikes.
USD/JPY Technical Analysis and Expectations Today:
According to the performance on the daily chart, the overall trend of the USD/JPY currency pair remains upward. Furthermore, the continuation of Trump's previous policies will support the US dollar in achieving more. Currently, the closest resistance levels are 154.50 and 156.00, and from the latter level, technical indicators will move towards overbought levels. Conversely, and over the same time frame, the upward trend will be broken if the currency pair moves below the support level of 150.86. technically, the pair will remain in its current upward range until the announcement of the US inflation reading and clarity on the future of Trump's exciting policies.
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