USD/JPY Returns Higher to Test the 100 SMA, As Ueda Keeps Status Quo

In his first news conference as head of the Bank of Japan, the new Governor Ueda stated that the current monetary policy was appropriate and that he had no plans to make any major shifts. Despite speculation that he would make significant moves in response to rising inflation, Ueda poured cold water on this sentiment by stating that the yield curve control was considered most appropriate for the economy at the moment.

This has lowered expectations of a policy shift at the April 28th meeting and caused the yen to experience sharp losses. Despite the US/Japan rate differential widening as the FED continues to hike rates and the BOJ continues to cap yields on 10-year government bonds and keep interest rates negative, Ueda’s message seems to be one of continuity and stability, which should keep the JPY weak.

From a technical standpoint, USD/JPY has been making higher lows, since bottoming out below 128 by the middle of January. The US Dollar experienced some strong selling pressure yesterday,  ahead of today’s US CPI consumer inflation report, but this forex pair ended the day higher, which shows that the JPY was even weaker than the USD and weakest across the board. Now this pair is facing the 100 daily SMA (green) again, so we will see if it will reject the price or whether buyers will manage to push USD/JPY above this moving average.