USD/JPY Surges on BOJ Pledge to Keep Rates Ultra-Low

The Dollar/Yen jumped to a twenty-year high early Thursday after the Bank of Japan (BOJ) doubled-down on its ultra-low yield policy by offering to buy immeasurable amounts of bonds every session as needed.

The news was a little surprising as reflected in the recent sideways-to-lower chart pattern that showed some market speculation the BOJ might step back a little given inflation was rising and other major central banks were tightening, but it showed no hesitation.

At 06:28 GMT, the USD/JPY is trading 130.072, up 1.644 or 1.28%. On Wednesday, the Invesco CurrencyShares Japanese Yen Trust ETF (FXY) settled at $73.06, down $0.49 or -0.67%.

As widely expected, the BOJ left unchanged its -0.1% target for short-term interest rates and a pledge to guide the 10-year bond yield around 0%.

Additionally, in fresh quarterly forecasts, the central bank projected core consumer inflation to hit 1.9% in the current fiscal year before moderating to 1.1% in fiscal 2023 and 2024 – a sign it sees current cost-push price rises as transitory.

Essentially, with the BOJ offering to buy unlimited amounts of 10-year government bonds to defend an implicit 0.25% cap around its zero target every day, and the Fed expected to raise rates by at least 50-basis points in May, June and June, the dollar will remain the most sought after currency.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through the intraday high of 130.271 will reaffirm the uptrend. A move through 126.945 will change the main trend to down.

The new minor range is 126.945 to 130.271. Its 50% level at 128.608 is the nearest support. This is followed by additional 50% support levels at 126.871 and 125.778. These levels will move higher as the Dollar/Yen advances.

Daily Swing Chart Technical Forecast

Trader reaction to 128.427 will likely determine the direction of the USD/JPY on Thursday.

Bullish Scenario

A sustained move over 128.427 will indicate the presence of buyers. Taking out 130.271 will indicate the buying is getting stronger with no upside target or resistance in sight.

Bearish Scenario

A sustained move under 128.427 will signal the presence of sellers. This will also put the USD/JPY on the weak side of the pivot at 126.608. If this price fails, there could be an acceleration into a support cluster at 126.945 – 126.871.

Side Notes

A close under 128.427 will form a potentially bearish closing price reversal top. If confirmed, this could trigger the start of a minimum 2 to 3 day correction.