- Japanese yen declines for six sessions, with the USD/JPY reaching its highest mark since April.
- The Bank of Japan has maintained its policy rate at 0.50% for the fourth straight meeting.
- The BOJ is raising its inflation forecast for the fiscal year to 2.7% due to pressures on food prices, but cautions that domestic consumption remains vulnerable.
The Japanese yen (JPY) has been weakening against the USD/JPY pair for six days in a row. This follows the Bank of Japan’s (BOJ) decision to keep rates steady at 0.50% across its last four meetings, pushing the USD/JPY pair to its highest level in four months.
As of now, the USD/JPY is climbing, breaking through the key psychological level of 150.00 and reaching around 150.72 during American trading hours, marking an increase of almost 0.85% for the day.
During a press conference on Thursday, BOJ Governor Ueda explained that the bank has unanimously decided to keep short-term interest rates stable. They’ve also raised their core consumer inflation forecast to 2.7% for the current fiscal year. Ueda noted that any future rate hikes would depend on data, indicating the BOJ might not wait for inflation to hit the 2% target before taking action. Instead, they’re likely to respond when inflation is perceived as “very high” and expected to sustain that level, especially if wage growth continues. Although Ueda recognized improvements in inflation trends, much of the current pressure is supply-driven, mainly due to rising food prices. He also cautioned that premature tightening could negatively affect domestic consumption.
The governor expressed support for a recent US trade agreement, calling it a “significant step forward” in reducing economic uncertainty. However, he warned that the complete effects of shifting trade dynamics and tariffs are yet to unfold, adding that the recent fluctuations in the yen were within the BOJ’s expectations and had not significantly altered its inflation outlook.
On a technical level, the USD/JPY experienced a bullish breakout from an ascending triangle, which typically indicates potential upward movement. After testing the upper limit of the triangle near 146.00, the pair rebounded sharply, confirming the breakout and reinforcing bullish trends. The currency pair is currently trading above short-term moving averages, buoyed by strong upward momentum. This momentum is further supported by a sustained rise above the 100-day exponential moving average (EMA) at 146.77 and the 200-day EMA at 147.99.
The successful test of the ascending triangle pattern suggests that buyers have regained control, with current price action aiming toward the next resistance level near 154.57, following the April high of 151.08 and the February peak. On the downside, immediate support stands at 149.00, followed by the 200-day EMA.
Momentum indicators reflect a bullish trend. The relative strength index (RSI) is around 69, nearing overbought territory, while the moving average convergence divergence (MACD) shows a bullish alignment with a growing gap between the MACD and signal lines. Rising histogram bars confirm sustained upward momentum.
