USD/JPY Rises Amid BoJ’s Steady Policy and Fed’s Rate Cut Pushback

Arslan Butt•Tuesday, December 19, 2023•2 min read

The Japanese Yen (JPY) experienced a significant downturn, driving the USD/JPY pair upwards for three consecutive days following the Bank of Japan’s (BoJ) latest policy announcement on Tuesday. The BoJ, as expected, retained its Yield Curve Control (YCC) policy, leading to a unanimous decision to maintain the existing monetary approach.

The unchanged policy, coupled with a stable outlook in equity markets, exerted considerable pressure on the JPY.Concurrently, the US Dollar (USD) garnered support from recent statements by Federal Reserve officials.

These officials have countered the market’s anticipation of early rate reductions in 2024, thereby reinforcing the USD. However, geopolitical tensions, including developments in the Middle East, may curtail further losses for the JPY.

Investors are also cautious about placing strong bullish bets on the USD/JPY pair before BoJ Governor Kazuo Ueda’s press briefing, which might hint at potential policy changes in the coming year.

Further, the BoJ’s decision to maintain the short-term interest rate target and the 10-year JGB yield target at -0.1% and 0%, respectively, added to the downward pressure on the JPY. Additionally, reports from Reuters suggest the Japanese Finance Ministry is contemplating an earlier reduction of 20-year bonds by JPY200 billion from January.

In the US, influential Fed officials are attempting to temper expectations for imminent interest rate cuts.

Chicago Fed President Austan Goolsbee expressed confusion over market reactions to the recent FOMC meeting, emphasizing that rapid interest rate cuts are not on the cards. Cleveland Fed President Loretta Mester’s remarks echoed this sentiment, suggesting that market expectations might be outpacing the Fed’s plans. These comments, alongside those from other FOMC members, indicate a more cautious approach to rate cuts.

Geopolitical events, such as the Houthi attacks in the Red Sea and escalating tensions in the Middle East, have driven safe-haven flows towards the JPY, adding another layer of complexity ahead of the BoJ’s policy decision.

USD/JPY Technical Outlook

Today, the USD/JPY pair displayed positive momentum, breaking past the 142.76 barrier and aiming for an intraday recovery. The initial target is set at 144.47, suggesting a bullish trend for the upcoming sessions.

Breaching this target could signal a return to the primary bullish trend, countering the recent bearish correction. Conversely, if the pair falls below 142.76, it might trigger a decline.

Today’s expected trading range is between 142.76 support and 144.40 resistance, with an overall bullish trend anticipated.

USD/JPY Live Chart

USD/JPY

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ABOUT THE AUTHOR See More

Arslan Butt

Index & Commodity Analyst

Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics.His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker.His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.

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USD/JPY Rises Amid BoJ’s Steady Policy and Fed’s Rate Cut Pushback

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USD/JPY Rises Amid BoJ’s Steady Policy and Fed’s Rate Cut Pushback

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