- Japan’s central bank met on Friday and decided to keep interest rates unchanged.
- Ueda’s post-meeting speech contained little on future rate hikes.
- The US central bank cut borrowing costs by 50 basis points on Wednesday.
USD/JPI price analysis shows Yen falling after Bank of Japan policy meeting. Although the central bank kept rates on hold as expected, Governor Ueda refrained from giving clear instructions on rate hikes. Instead, he focused on the economy.
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Japan’s central bank met on Friday and decided to keep interest rates unchanged. Furthermore, the central bank’s forecasts indicated that consumption in the Japanese economy would increase. Such an outlook favors expectations of interest rate hikes as policy makers will be more willing to hike when demand is strong.
However, Governor Ueda’s speech after the meeting contained little on future rate hikes. He did not give clear signals about raising interest rates, which disappointed investors who expected more hawkish remarks. Ueda noted that future decisions will depend on the economy, which was a cautious statement.
Meanwhile, the Fed has aggressively begun its rate-cutting cycle. The US central bank cut borrowing costs by 50 basis points on Wednesday, narrowing the interest rate gap between Japan and the US. Moreover, Powell’s speech indicated the belief that the fight against inflation is successful. Therefore, there will be more rate cuts in the future.
Although the yen fell on Friday, the future is bright. Lower interest rates in the US will continue to reduce interest rate differentials between the two countries, weakening the popularity of carry trades. At the same time, economists expect at least one more rate hike this year in Japan, which could boost the yen.
USD/JPI Key Events Today
Investors will continue to weigh the outcome of the Bank of Japan’s policy meeting, as there will be no other key economic announcements.
USD/JPI technical price analysis: Price is charging past the resistance zone
From the technical side, USD/JPY the price broke above a solid resistance zone with a bullish candle. Initially, the price paused at the 0.5 Fib level, where the bears initiated a pullback to the 30-SMA. However, the price remained above the SMA and the RSI above 50, maintaining a bullish bias.
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Shortly after, the bulls came back with tremendous force and pushed above the 143.01 and 0.5 Fib resistance. A bullish swallow candle closed above these levels, showing a clear breakout. The price is now targeting the next hurdle at the 145.00 level.
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