USD/JPY Surges as Bank of Japan Maintains Dovish Stance
The USD/JPY pair is attracting renewed buying interest after the Bank of Japan (BoJ) announced its policy decision on Friday, halting the overnight pullback from its recent high of 141.50, the highest level since November 2022. As the European session approaches, the pair maintains a positive tone and is currently trading near the upper end of its daily range, around the 140.65-140.70 area.
The Japanese Yen (JPY) is weakening across the board in response to the BoJ's decision to maintain its accommodative monetary policy stance in order to support the fragile economic growth. As anticipated, the Japanese central bank kept its short-term interest rate target at -0.1% and made no changes to its yield curve control policy following a two-day meeting. The BoJ also maintained its view that inflation will slow down later in the year, indicating that it will remain dovish amidst global uncertainties. Coupled with a modest strength in the US Dollar (USD), this helps the USD/JPY pair regain some upward momentum on the last trading day of the week.
After experiencing significant losses over the past three days, the USD Index (DXY), which measures the Greenback against a basket of currencies, is seeing a modest rebound from a five-week low, supported by an increase in US Treasury bond yields. However, the potential for a substantial USD rally appears limited due to expectations that the Federal Reserve (Fed) is nearing the peak of its policy tightening cycle. The release of underwhelming US macroeconomic data on Thursday, including Industrial Production, Weekly Jobless Claims, and Retail Sales, has raised doubts about the likelihood of additional interest rate hikes by the Fed.
On the other hand, the US central bank indicated earlier this week that borrowing costs may still need to rise by as much as 50 basis points by the end of the year. This creates a significant divergence compared to the dovish outlook of the BoJ, which could continue to undermine the JPY. Furthermore, the reduced likelihood of Japanese government intervention to stabilize the domestic currency suggests that the path of least resistance for the USD/JPY pair is to the upside. Therefore, any intraday dips in the pair may still be viewed as buying opportunities and find support in the absence of any influential market-moving data from the US.
Considering the technical analysis, the triangle pattern is broken, and the price has rebounded from the 61.8% Fibonacci level, while retesting the dynamic resistance of the triangle pattern. This development raises the question of whether the USD/JPY pair could experience further growth.
The Japanese Yen (JPY) is weakening across the board in response to the BoJ's decision to maintain its accommodative monetary policy stance in order to support the fragile economic growth. As anticipated, the Japanese central bank kept its short-term interest rate target at -0.1% and made no changes to its yield curve control policy following a two-day meeting. The BoJ also maintained its view that inflation will slow down later in the year, indicating that it will remain dovish amidst global uncertainties. Coupled with a modest strength in the US Dollar (USD), this helps the USD/JPY pair regain some upward momentum on the last trading day of the week.
After experiencing significant losses over the past three days, the USD Index (DXY), which measures the Greenback against a basket of currencies, is seeing a modest rebound from a five-week low, supported by an increase in US Treasury bond yields. However, the potential for a substantial USD rally appears limited due to expectations that the Federal Reserve (Fed) is nearing the peak of its policy tightening cycle. The release of underwhelming US macroeconomic data on Thursday, including Industrial Production, Weekly Jobless Claims, and Retail Sales, has raised doubts about the likelihood of additional interest rate hikes by the Fed.
On the other hand, the US central bank indicated earlier this week that borrowing costs may still need to rise by as much as 50 basis points by the end of the year. This creates a significant divergence compared to the dovish outlook of the BoJ, which could continue to undermine the JPY. Furthermore, the reduced likelihood of Japanese government intervention to stabilize the domestic currency suggests that the path of least resistance for the USD/JPY pair is to the upside. Therefore, any intraday dips in the pair may still be viewed as buying opportunities and find support in the absence of any influential market-moving data from the US.
Considering the technical analysis, the triangle pattern is broken, and the price has rebounded from the 61.8% Fibonacci level, while retesting the dynamic resistance of the triangle pattern. This development raises the question of whether the USD/JPY pair could experience further growth.
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