USD/JPY Kicks Off the Week with Fresh 20-Year Highs

  • USDJPY
    (${instrument.percentChange}%)

USD/JPY Analysis

The US Federal Reserve delivered its biggest rate hike in more than 20 years on Wednesday, hinted at more increases ahead and announced a plan to reduce its nearly $9 trillion balance sheet, starting next month. [1]

The Bank of Japan on the other hand maintains its ultra loose policies, having reiterated its pledge to buy limitless amount of government bonds (JGBs) during its last policy decision. [2]

This stark contrast between the two central banks is the main driver between the pair's recent rally which exceeds 10% from the beginning of March, the month during which the Fed raised rates for the first time since 2018.

USD/JPY comes from an impressive nine-week profitable streak and the new one starts on the front foot, clinching levels that have not been seen since April 2002. Bulls now eye 132.00, but they will likely need fresh impetus in order to challenge 133.89.

From a technical prospective a pullback would be reasonable, while the Relative Strength Index (RSI) has not followed higher recently, which could be a prelude to such an outcome. This could lead to pressure and a test 130.00, although a catalyst would be required for a correction to new month lows (128.61) and beyond.

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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

1

Retrieved 09 May 2022 https://www.federalreserve.gov/monetarypolicy/fomcpresconf20220504.htm

2

Retrieved 16 May 2022 https://www.boj.or.jp/en/announcements/release_2022/k220428a.pdf

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