USD/JPY Analysis: Rate Reaches Maximum of the Year

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This morning, the Bank of Japan's decision on the interest rate, which has been kept at -0.1% since 2016, became known. The rate size remained unchanged.

Although surprises could occur due to the fact that inflation is still above the central bank's target of 2% for the 17th month in a row. So a tightening of policy is becoming more and more likely. CNBC writes that the Bank of Japan may be prompted to take this step by the weakness of the national currency.

This morning, as the chart shows, the rate has risen very close to the highs of the year. It is possible that it will be updated during the day today.

Bullish arguments:

  • The continuing difference in the monetary policies of the United States and Japan contributes to the growth of the exchange rate even higher.
  • The border of the current bullish channel has not been reached, the potential for growth remains.
  • Rising lows this week indicate stronger demand.
  • Even if the yen strengthens, the trend can be supported by both the median and the lower border of the ascending channel.

Bearish arguments:

  • Market participants' fear of intervention by the Japanese authorities around the level of 150 yen per US dollar, which is considered critical, may weaken the upward trend.
  • If the US dollar index, which rose close to the highs of the year, rolls back, this will strengthen the yen.