Continuing to Buy Retreats in USD/JPY as The Divergence Between the FED and BOJ Policy Remains
USD/JPY has been on an upward trend for months now and it continues to show strength, as the JPY continues to slide lower pretty fast, on the Bank of Japan holding their policy steady as inflation remains under control in Japan, while starting to slow last month. On the H4 chart above, we can see that this forex pair broke above the 145.00 level which opens the door for further gains and another bullish run toward the 150.00 level, so we’re in the zone where the Bank of Japan intervened last year, although it doesn’t necessarily mean that they will intervene again this time.
In the last two weeks, this pair has been finding support at smaller moving averages, with the 20 SMA (gray) taking over recently, which shows that the buying pressure is strong. Although we saw a retreat to the 50 SM A(yellow) at the end of last week, which held and we decided to open a buy USD/JPY signal here. We will follow the price action to see what happens next, whether this pair wants to go higher or lower as a fallback below the 145.00 level should open the door for a deeper pullback.
The Bank of Japan (BoJ) recently made a decision to keep its monetary policy unchanged, as widely expected. This likely includes keeping the Yield Curve Control (YCC) policy in place, which involves targeting certain yields on Japanese government bonds to control interest rates and support economic activity.
The FED on the other hand is also expected to remain on hold, but the FED is at the top of the rate hike cycle with interest rates at 5.25%, while the BOJ is at the bottom of the cycle, after refraining to raise rates in the last two years. If the FED keeps the rates at current levels, that’s still considered quite hawkish, without even counting another rate hike, which seems unlikely now. So, we decided to open a buy USD/JPY signal above the 50 SMA and are waiting for the bullish trend to resume soon.
USD/JPY Live Chart
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