USD/JPY on Cusp of Testing 2022 High as BoJ Only Tweaks YCC

By :  ,  Strategist

US Dollar Outlook: USD/JPY

USD/JPY trades to a fresh yearly high (151.70) even as the Bank of Japan (BoJ) tweaks its Yield Curve Control (YCC) program, and the exchange rate may track the positive slope in the 50-Day SMA (148.36) as it bounces back ahead of the moving average.

USD/JPY on Cusp of Testing 2022 High as BoJ Only Tweaks YCC

USD/JPY clears the series of lower highs and lows from last week as the BoJ continues to carry out its non-standard measures, and it seems as though Governor Kazuo Ueda and Co. are in no rush to switch gears as the central bank now plans to ‘conduct yield curve control with the upper bound of 1.0 percent.’

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As a result, USD/JPY is on the cusp of testing the 2022 high (151.95) as the BoJ pledges to ‘patiently continue with monetary easing,’ but the Federal Reserve interest rate decision may produce headwinds for the Greenback as the central bank is expected to keep US interest rates on hold.

US Economic Calendar

US Economic Calendar 10312023 Economic Calendar

An adjustment in the forward guidance for monetary policy may drag on USD/JPY as the Federal Open Market Committee (FOMC) appears to be at or nearing the end of its hiking-cycle, but more of the same from Chairman Jerome Powell and Co. may generate a bullish reaction in the Greenback as ‘a majority of participants judged that one more increase in the target federal funds rate at a future meeting would likely be appropriate.’

CME FedWatch Tool

CME FedWatch Tool 10312023

Source: CME

In turn, developments coming out of the FOMC may bring increased attention to foreign exchange markets despite the threat of a currency intervention by Japanese authorities, and speculation surrounding future Fed policy may sway USD/JPY as the CME FedWatch Tool currently shows a greater than 60% probability of seeing US interest rates unchanged over the remainder of the year.

With that said, USD/JPY may struggle to retain the advance following the BoJ meeting as the Fed is expected to keep US interest rates on hold, but the exchange rate may continue to retrace the decline from the 2022 high (151.95) should it track the positive slope in the 50-Day SMA (148.36).

USD/JPY Price Chart – Daily

USDJPY Daily Chart 10312023

Chart Prepared by David Song, Strategist; USD/JPY on TradingView

  • USD/JPY appears to have revered ahead of the 50-Day SMA (148.36) as it trades to a fresh yearly high (151.70), and the exchange rate may attempt to test the 2022 high (151.95) should it track the positive slope in the moving average.
  • Next area of interest comes in around the July 1990 high (152.25) followed by the 153.50 (50% Fibonacci extension) area, but the Relative Strength Index (RSI) may continue to diverge with price if it fails to push into overbought territory.
  • Lack of momentum to take out the 2022 high (151.95) may push USD/JPY back towards the 149.40 (100% Fibonacci extension) to 150.30 (61.8% Fibonacci extension) region, with a breach below the moving average bringing the monthly low (147.29) on the radar.

Additional Market Outlooks:

US Dollar Forecast: AUD/USD Poised for Test of 50-Day SMA Ahead of Fed

US Dollar Forecast: EUR/USD Post-ECB Drop Brings Test of Monthly Low

--- Written by David Song, Strategist

Follow on Twitter at @DavidJSong


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