USD/JPY Outlook: Soars Amid Fed’s Hawkish Pause, Eyes on BoJ

• The US dollar experienced a strong rally following the hawkish Fed meeting.

• The yen weakened to its lowest point this year before the BOJ meeting.

• Analysts suggest that policymakers might intervene if the yen weakens rapidly.

Today’s USD/JPY outlook is bullish. On Thursday, the US dollar experienced a strong rally following the Federal Reserve’s indication of future rate hikes. Now, the market focus is shifting towards upcoming central bank decisions. The yen weakened to its lowest point this year, coinciding with the Bank of Japan’s commencement of a two-day policy meeting.

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Elsewhere, more than half of the economists surveyed by Reuters stated that the Japanese government and central bank would take action to prevent the yen from declining further. This will happen if it reaches the 145 per US dollar level. 

The market closely monitors the response of the government and the Bank of Japan to currency movements. This is especially after their recent meeting when the yen approached a six-month low.

96% of the respondents in the poll expect the BOJ to maintain its current policy this week. Meanwhile, around half anticipate a reduction in easing measures, such as adjustments to the yield curve control scheme, either in July or September. 

Furthermore, analysts suggest that policymakers might intervene if the yen weakens rapidly. Additionally, they will intervene if the depreciation is perceived to prolong domestic inflation and impact households’ purchasing power. 

In May, the BOJ, finance ministry, and Financial Services Agency held a three-party talk similar to the one conducted last year. In September, this preceded Japan’s first intervention in 24 years, involving selling dollars and buying yen.

USD/JPY key events today

Investors expect sales data from the US, a leading indicator of consumer spending and the state of the economy. Additionally, investors expect the US jobless claims report.

USD/JPY technical outlook: Bullish breakout leads to a higher high at 141.50.

USD/JPY has finally broken out of consolidation in the 4-hour chart. The price shot up, breaking above the 140.25 range resistance level. This has seen the continuation of the previous bullish trend. The price traded between the 138.75 resistance and the 140.25 resistance levels for a long time. 

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With the recent breakout, bulls have retested the 141.50 resistance, pushing farther above the 30-SMA. Additionally, the RSI now trades nearer the overbought region. The price will likely pause at 141.50 before pushing higher to make new highs.

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