USDJPY rose on Friday after the Bank of Japan kept its ultra-low interest rate at -0.1%. The regulator promised to continue supporting the economy until inflation steadily reaches the 2% target. This suggests that the bank is in no hurry to wind down its massive stimulus program.
Markets are closely watching Bank Governor Kazuo Ueda's comments for clues on how soon the bank could wind down its massive stimulus program.
The Bank of Japan said in its statement that it expects the moderate economic recovery to continue.
The BOJ faces various challenges in exiting former Governor Haruhiko Kuroda's radical stimulus, including weak signs in the global economy and the risk of triggering a spike in bond yields that would boost the cost of funding Japan's huge public debt.
Bank of Japan officials, including Ueda, also emphasized the need to keep the policy loose until they are convinced that inflation dynamics are stable. This is based on sustained growth in consumption and wages, not on temporary factors such as global oil prices.
The Bank of Japan's decision contrasts with that of the U.S. Federal Reserve (Fed).
At the Fed's meeting on Wednesday, the interest rate was kept unchanged, but the regulator expressed its intention to further tighten monetary policy. Against this background, the U.S. currency reached a 6-month high, and the 10-year Treasury bond rate hit its highest level in 16 years.
The central bank expressed its intention to continue fighting inflation and keep interest rates at the high level for a longer time.
The USDJPY rate is now forming an upward corrective channel on the daily timeframe. A local trend support has formed inside the channel on the lower timeframe, which restrains the strong decline of the pair. Fundamental factors point to the continuation of the existing trend.
Signal:
Short-term prospects for USDJPY suggest buying.
The target is at the level of 150,00.
Part of the profit should be taken near the level of 148,90.
A stop-loss could be placed at the level of 146,7.
The bullish trend is short-term, so trade volume should not exceed 2% of your balance.
This content is for informational purposes only and is not intended to be investing advice.
