USD/JPY Reacts to BoJ’s Monetary Policy Stance Amid Global Economic Data Releases
The USD/JPY experienced a significant rally early Tuesday, following the Bank of Japan’s (BoJ) unexpected maintenance of its current monetary policy, countering market speculations of a hawkish turn. BoJ Governor Kazuo Ueda had previously hinted at potential future policy tightening if macroeconomic data were favourable, sparking investor anticipation. However, this conjecture outran the actual market conditions, leading to premature expectations of the BoJ initiating a shift towards monetary tightening.
Subsequent clarifications in the BoJ’s Monetary Policy Statement and the press conference indicated that the prerequisites for a policy shift towards tightening are not yet met and remain a distant objective rather than an immediate change. This revelation caused a notable decline in the Yen, dropping nearly 2% against the US Dollar, as market expectations realigned.
Governor Ueda emphasized the BoJ’s focus on wage growth trends into 2024 before considering any policy modifications, falling short of the market’s heightened expectations of an imminent end to the negative rate regime.
Attention now shifts to key US economic data releases in the final week of trading for 2023, including the US Gross Domestic Product (GDP) and the Personal Consumption Expenditure (PCE) Price Index.
The GDP is anticipated to remain stable at 5.2% annually for the third quarter, while the PCE Index, the Federal Reserve’s preferred inflation gauge, is expected to decrease marginally from 3.5% to 3.3% for the year ending in November.
From a technical standpoint, the USD/JPY pair is likely to continue its bullish trend, with resistance anticipated at 144.80 and support around 143.10. A successful breach of the 144.47 resistance could pave the way towards 146.17. However, a break below 142.76 might trigger a bearish shift towards the 140.65 region in the near term.
USD/JPY Live Chart
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