USD/JPY Forecast: Skyrockets after BOJ Governor Kazuo Ueda Signals Continued Ultra-Loose Monetary Policy

Highlights

• Positive jobs report strengthens USD and raises Fed rate hike expectations
• New BOJ governor Kazuo Ueda maintains ultra-loose monetary policy for now
• Ueda more open to tweaking bond yield control policy than predecessor

Overview

The Dollar/Yen strengthened as a result of a positive jobs report in March, which led to expectations that the Federal Reserve would increase interest rates again in May. Meanwhile, the Japanese Yen weakened as the new governor of Japan’s central bank, Kazuo Ueda, indicated that he was not in a hurry to reduce the country’s significant monetary stimulus.

Friday’s U.S. Non-Farm Payrolls report showed that the US labor market was strong, with 236,000 new jobs added in March and the unemployment rate dropping to 3.5%, signaling that the Fed will likely continue to raise interest rates.

At 18:00 GMT, the USD/JPY is trading 133.613, up 1.449 or +1.10%. The Invesco CurrencyShares Japanese Yen Trust ETF (FXY) is trading $69.72, down $0.96 or -1.36%.

BOJ Governor Kazuo Ueda Maintains Ultra-Loose Monetary Policy for Now

Japan’s new central bank governor, Kazuo Ueda, has stated that the Bank of Japan (BOJ) should maintain its ultra-loose monetary policy for now, as inflation has not yet hit the target of 2%.

However, Ueda also believes that the BOJ should not be too late in normalizing monetary policy and that it is important to make preemptive and appropriate decisions. He is more open to the idea of tweaking the bank’s bond yield control policy than his predecessor, Haruhiko Kuroda.

The market has been rife with speculation that the BOJ could phase out yield curve control (YCC), a policy that caps the 10-year bond yield around zero, due to growing criticism that it distorts markets and hurts banks’ margins. Ueda’s term began on April 9, and he will chair his first policy meeting on April 27-28.

Daily USD/JPY Technical Analysis

The main trend is up according to the daily swing chart. The trend turned up earlier today when buyers took out the previous main top at 133.756. A trade through 130.633 will change the main trend to down.

The short-term range is 137.911 to 129.641. Its retracement zone at 133.776 to 134.752 is potential resistance. The upper or Fibonacci level at 134.752 is also a potential trigger point for an acceleration to the upside.

On the downside, the major support is a long-term retracement zone at 132.569 – 131.308.

Daily USD/JPY Technical Forecast

Trader reaction to the short-term 50% level at 133.776 is likely to determine the direction of the USD/JPY into the close on Monday.

Bullish Scenario

A sustained move over 133.776 will indicate the presence of buyers. If this creates enough upside momentum then look for a surge into the Fibonacci level at 134.752.

Bearish Scenario

A sustained move under 133.776 will signal the presence of sellers. If this generates enough downside momentum then look for the near-term selling to possibly extend into the long-term 50% level at 132.569.