USD/JPY Shows Indecision, Close to its 6-Year Highs
Fed-BoJ Policy Divergence
Last Wednesday, the US Federal reserve delivered its first rate hike since 2018, noting that further adjustments are "appropriate" [1], while the updated staff projections pointed to roughly six more moves within the year[2].
The reduction of the balance is expected to begin "at a coming meeting", with Mr Powell specifying that this could come "as soon as our next meeting in May", during his press conference. [3]
The Bank of Japan followed on Friday and confirmed its sharp divergence from the Fed and most of its major counterparts, staying on the far dovish side of the monetary policy spectrum.
The BoJ maintained rates at -0.1% and reiterated its readiness to "take additional easing measures" if needed, while stating that the economy "has picked up as a trend". [4]
USD/JPY Indecsion
The pair had another impressive week, rising to levels not seen since February 2016 (119.40), but today it shows indecision, staying close to those levels though.
The two-week 400+ pips rally, has brought psychological 120.00 mark in the spotlight, although bulls may need fresh impetus for a break and 121.68 is probably distant at this stage.
On the other hand, the Relative Strength Index (RSI), has not followed USD/JPY higher, in what could be a precursor for a retracement that could test 118.35, but larger decline towards and below 117.30 would need strong catalyst.
Nikos Tzabouras
Senior Market Specialist
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.
With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.
References
| Retrieved 21 Mar 2022 https://www.federalreserve.gov/monetarypolicy/files/monetary20220316a1.pdf | |
| Retrieved 21 Mar 2022 https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20220316.pdf | |
| Retrieved 21 Mar 2022 https://www.federalreserve.gov/mediacenter/files/FOMCpresconf20220316.pdf | |
| Retrieved 30 May 2023 https://www.boj.or.jp/en/announcements/release_2022/k220318a.pdf |
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