- Summary:
- USDJPY is on a strong downward momentum with BoJ's surprise 25 basis points hike and reduced bond purchase appetite amid impeding Fed rate cut
USDJPY declined further on Thursday, going on to hit the lowest level since mid-March. The pair was down by 0.3 percent in the intraday session to trade at 149.49. Traders have placed their bets on the yen, following the Bank of Japan’s decision to raise interest rates. In a surprise move, the BoJ raised lending rates by 25 basis points, exceeding consensus forecast of 10 basis points. In addition, the bank announced that it will cut down its bond purchase plans to $19.64 billion for the quarter ending March 2026.
The change in the monetary policy, coupled with a better-than-expected decline in Japan’s unemployment rate June will keep USDJPY subdued in the near-term. Meanwhile, the US dollar is boosted by safe-haven demand amidst Middle East tension, but gains will be limited by expected rate cuts in September, cemented by Fed Chairman Jerome Powell’s comments on Wednesday.
Momentum indicators
The USDJPY pair has broken below the lower Bollinger Band on the daily chart, pointing to a prolonged control by the sellers. However, a return to 156.48, aligning with the middle band could provide a pathway to the upside. Also, the RSI on the pair is at 20, affirming the downward momentum. Meanwhile, the 50-period Exponential Moving Average (EMA) is above the 20-EMA, on the 2-hour chart, adding support to the downside narrative.
Support and resistance
USDJPY looks to extend the downside if resistance persists at 150.00. That will likely see the establishment of the first support at 149.18. However, extended control by the sellers could break that support and potentially take the exchange rate lower to test 148.50. Conversely, movement above 150.00 will favour the buyers to take control. In that case, the first resistance will likely come at 150.57, but further control by the buyers at that point will breach that mark and invalidate the downside narrative. Furthermore, it could strengthen the upside momentum to test 151.22.
