Continued soft rhetoric from the Japanese central bank weakens the yen

The USDJPY currency pair has been in an uptrend since early March. It was at that time when the head of the Bank of Japan called on his successor to continue quantitative easing. In fact, this is what happened. Due to the continued soft monetary policy, the Japanese yen has begun to weaken against the dollar again.

The Bank of Japan left the basic parameters of monetary policy (MP) unchanged at the end of April, which was the first for Kasuo Ueda, the new head of the Central Bank. The Central Bank repeated that it is ready to maintain its stimulative policy until inflation stabilizes at the 2% target level.

The Bank of Japan also announced its intention to conduct a monetary policy review, the results of which will be published in 12-18 months.

Conversely, the Fed continued to tighten its monetary policy at its last meeting in early May. At the same time, Powell rejected the possibility of a rate cut in 2023. The latest U.S. consumer price index (CPI) data point to a decline in April in line with analysts' forecasts. TD Securities (TDS) experts believe that the rate of core inflation will remain high ahead of the Federal Open Market Committee (FOMC) meeting in June.

As a result, we get the continued soft monetary policy in Japan and no signals for a rate cut in the U.S. This could lead to further growth of the dollar against the Japanese yen. The decline in global inflation will also affect Japan. The regulator will have to soften policy again for stimulating the economy.

According to the technical analysis, the USDJPY currency pair has maintained its uptrend. A triangle pattern is forming, in which it is possible to trade now. The pattern is unlikely to disclose in the near future. This requires some events that the market does not consider right now. The growth target is at the level of price local highs for the last months 137.5. Stop-loss can be set at the break down of the trend at 133.2. If the stop is broken down, it is likely that the price low of the last year will be tested.

Growth of the USDJPY currency pair:

Take profit – 137.5

Stop-loss – 133.2