- The Bank of Japan raised interest rates for the first time in 17 years on Tuesday.
- Japan’s central bank intends to continue with easier monetary conditions.
- Traders await Wednesday’s FOMC policy meeting.
The USD/JPI outlook shines with bullish sentiment, driven by a weaker yen as investors take profits following the BoJ’s policy shift. Namely, the Bank of Japan increased interest rates on Tuesday for the first time in 17 years. However, markets have already priced in such a move. So it was no surprise.
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Moreover, Japan’s central bank intends to continue with easier monetary conditions, which could affect the yen. At the same time, the yen remains vulnerable to Fed decisions, which usually have a large impact on the currency.
Traders now await Wednesday’s FOMC policy meeting for more clues on the Fed’s rate cut prospects. Recently, the dollar strengthened after data revealed persistently high inflation in the US. Moreover, bets on a June rate cut fell as investors lowered expectations.
Goldman Sachs recently revised its forecast for Fed rate cuts in 2024 from 4 to 3, meaning the Fed is likely to keep rates high for longer.
Therefore, there is a chance that the Fed will be hawkish at the meeting. Such an outcome would further strengthen the dollar and push USD/JPI back to the key 152.00 level. The Fed could also boost expectations for a first rate cut by July.
USD/JPI Key Events Today
After the BoJ policy meeting, there are no major events today. Therefore, investors will continue to absorb the policy change.
USD/JPI Technical Outlook: Price is rising beyond the resistance zone
On the technical side, USD/JPI price broke above the resistance zone consisting of 0.618 Fib and 149.01 key levels. The breakout shows tremendous momentum as the price formed a solid bullish candle, pushing well above the 30-SMA. At the same time, the RSI entered the overbought region, indicating solid bullish momentum.
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Currently, the price is approaching the key resistance level of 150.75, where it could pause or pull back before continuing higher. A pullback could retest the recently broken resistance zone or support from the 30-SMA, where bulls would continue the uptrend. Meanwhile, a break above the 150.75 resistance level would allow the price to retest higher resistance levels.
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