Japanese Yen Forecast: BoJ's Dovishness Puts USD/JPY Channel Breakout in Play – DailyFX

USD/JPY forecast:

• Financial policy The divergence between the Fed and the Bank of Japan will continue to weigh on the outlook. JPY
• of USD Maintaining a constructive profile for now
• What you see in this article is USD/JPY Key levels to watch over the next few days

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The Federal Reserve and the Bank of Japan held their September monetary policy meeting last week. First, the Fed maintains its hawkish bias, signaling the possibility of further tightening this year and predicting that interest rates will remain high for an extended period of time. Meanwhile, the Bank of Japan stuck to its long-standing ultra-accommodative stance and refrained from hinting at any imminent change in strategy.

This marked difference in monetary policy between these two central banks currently favors a stronger US dollar. This is because intermittent talk of foreign exchange intervention by the Japanese government may prevent speculators from depreciating the yen excessively, so although there is some moderation, there is a possibility that the yen will weaken further in the short term. It means something.

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From a technical perspective, USD/JPY on Friday rebounded on the back of the BOJ’s dovish position and rose above the 148.00 handle, but failed to break through the upper bound of the ascending channel since December 2022, currently at 148.50. positioned. Although it may be difficult for buyers to remove this barrier, a successful breakout could create strong upward pressure and expose 148.80 and then 150.50.

If the market sentiment changes unexpectedly in favor of sellers and the price is rejected from the current level, the first support line will be observed at 147.30, followed by 145.90. If the bearish momentum continues, there could be a retracement towards 144.55, which is currently just below the 50-day simple moving average.

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Technical analysis of USD/JPY

USD/JPY chart created using TradingView