Bank of Japan adjusts the USDJPY rate

The USDJPY currency pair started to decline on Thursday.

According to the results of the last meeting of the Federal Reserve (Fed), interest rates in the US were left unchanged. Commenting on the actions of the central bank, Chair Jerome Powell did not answer whether this implies the definitive end of the monetary tightening cycle.

According to him, further steps will depend on inflation indicators. As noted by the head of the Fed, decisions will be made separately for each meeting on the basis of the incoming data.

Nevertheless, this hawkish stance of Powell did not become a serious cause for concern in the currency market. Investors are now awaiting the US Non-Farm Payrolls report scheduled for Friday. It will provide more information on the central bank's interest rate trajectory. 

This week the USDJPY pricing is mostly determined by news from Japan.

The contradictions in Japan’s efforts to protect the yen while slowing the pace of rising bond yields are becoming increasingly clear in currency and debt markets.

The action in Tokyo on Wednesday underscores Japan’s huge challenge. The day began with the nation’s top currency official at the finance ministry giving one of the starkest warnings yet that authorities were ready to intervene in the foreign exchange market to stem the yen’s fall. By lunchtime the Bank of Japan was preparing to wade into the debt market to slow the speed of the 10-year bond yield’s ascent toward 1%.

The BOJ’s unscheduled bond purchases were jarring — coming just 24 hours after the central bank removed its 1% cap on these yields. The operation also worked directly against efforts to support the yen, which is being weighed down by the wide gulf between interest rates in Japan and the US.

The currency market saw some chaos in the yen pairs. However, the Japanese currency gained 0.5% on Wednesday and another 0.2% on Thursday.

USDJPY quotes are forming an upward corrective channel on the daily timeframe. Divergence of the Relative Strength Index indicator (standard values) on the H4 timeframe increases the possibility of a price decline within the upward channel.

Signal:

Short-term prospects for USDJPY suggest selling. 

The target is at the level of 148.15.

Part of the profit should be taken near the level of 149.10.

A stop-loss could be placed at the level of 151.85.

The bearish trend is short-term, so trade volume should not exceed 2% of your balance.