USDJPY Stable Above 149.00 Ahead of BoJ Interest Rate Announcement

Summary:
• The Bank of Japan will announce whether or not it will exit the ultra-low interest rate policy on Monday, but USDJPY seems unperturbed.

The US dollar continued with its gains against the yen on Monday, as it sought to solidify its stability above 149.00. The USDJPY pair traded at 149.905, after going up by +0.11% at the time of writing. The Bank of Japan is set to announce its interest rate decision on Monday, and there’s much anticipation on whether it will finally exit its long-running Negative Interest Rate Policy (NIRP).

The dollar is on a four-day winning streak against the yen, and the trend will almost certainly continue unless the BoJ announces a change in its interest rate policy. While Japan’s economy has shown signs of improvement in the first quarter of the year, BoJ policymakers are still concerned over weak consumer spending. On Friday, however, Japan’s largest trade union reached a 5.28% salary increment with the country’s largest companies. This could play some part in influencing the BoJ decision.

Japan’s GDP unexpectedly grew by 0.1% in the fourth quarter of 2023, beating a projected -0.1% contraction. This has eased pressure on BoJ to rush interest rate changes, as it pushes to meet its longer-term objectives. Most analysts now expect a reversal of NIRP in April.

There’s little happening around dollar fundamentals on Monday, but high-yielding US Treasury bonds will likely provide support to the greenback. In addition, the dollar could have safe-haven buying tilting in its favour, amidst rising war temperatures in the Middle East. Israel on Sunday launched attacks on Gaza’s Al-Shifa hospital and reiterated plans to launch a ground attack on the densely populated Rafah city.

Technical analysis

USDJPY pivots at 148.75, with the RSI indicator signaling control by the buyers. This will likely see the currency pair break the 149.35 resistance in extension and potentially test 149.60. USDJPY could, however, lose upside momentum if action goes below 148.75. That will put the sellers in control. Furthermore, a breach of the 148.35 support will invalidate the upside view and set the pair on course to make a move on 148.00.