US Dollar Surges as BoJ Policy Remains Unchanged, USD/JPY Approaches 142.00
Introduction
In the midst of a cautious market climate, the US Dollar (USD) has been gaining strength, propelling the USD/JPY pair towards the pivotal barrier of 142.00. The Bank of Japan (BoJ) is expected to maintain its dovish stance, further widening the policy divergence between the two central banks.
USD/JPY Soars Amid Cautious Market Environment
The USD/JPY pair is witnessing a rapid surge, heading toward the critical resistance level of 142.00 during the European trading session. This bullish trajectory can be attributed to the strengthening of the US Dollar Index (DXY) and the growing likelihood that the Bank of Japan (BoJ) will refrain from making changes to its current interest rates decision during its meeting on July 28.
BoJ’s Ultra-Dovish Policy Stance and Fed’s Rate Hike Anticipation
While the Bank of Japan (BoJ) is expected to continue with its ultra-dovish policy stance that has persisted for over a decade, the Federal Reserve (Fed) is contemplating further interest rate hikes. This difference in policy approach is bolstering the USD/JPY pair, as investors predict an even wider policy disparity between the two central banks.
The Japanese Yen has notably depreciated against the US Dollar in light of this context, with the anticipation of further interest rate hikes by the Fed reinforcing the USD’s strength.
Reuters’ Insights on BoJ’s Policy Meeting
According to Reuters, the Bank of Japan (BoJ) is likely to stick with its yield curve control (YCC) strategy during the upcoming policy meeting. Although inflation has been rising faster than expected, the sustainability of this increase largely depends on business profits and wage outlook for the coming year.
USD/JPY Technical Analysis – Daily Chart
Technical Overview
- USD/JPY is currently trading within an upward channel.
- The pair is positioned above all Simple Moving Averages (SMA).
- The Relative Strength Index (RSI) indicates a bullish sentiment, while the Stochastic oscillator suggests a neutral trend.
- Resistance level: 141.90
- Immediate support level: 141.31
How to Trade USD/JPY?
After experiencing a price decline, the USD/JPY pair has rebounded and is currently showing a renewed upward trend. It is currently trading near the resistance zone after surpassing the previous day’s high. If this zone is breached, further upside movement is possible.
USD/JPY points towards a Buy signal, indicating a potential bullish outlook.
Trade Suggestion
- Entry: 142.09
- Take Profit: 142.85
- Stop Loss: 141.56
Conclusion
As the US Dollar continues to strengthen and the Bank of Japan maintains its dovish policy, the USD/JPY pair is witnessing a notable surge toward the 142.00 resistance level. The divergence in policy between the Federal Reserve and the BoJ is a key factor driving the currency pair’s movement. Traders should carefully analyze the technical indicators and consider potential trade suggestions when navigating the USD/JPY market.