The Japanese Yen (JPY) bounced higher after breaking a two-day losing streak versus the US Dollar (USD). Traders are now looking ahead to the Bank of Japan’s policy decision this Thursday. They are playing it safe and not making any big bets. This decision is central, for it may well set the tone of the currency for the coming week(s).
At the time of this writing, the USD/JPY pair is trying to continue its bullish momentum, looking to break above the key 143.00 psychological level. Traders are watching the 100-period Simple Moving Average (SMA) on the 4-hour chart like a hawk. This is indeed the key indicator in judging the pair’s performance. The zone between 142.65 and 142.60 is vital in this regard, cementing the near-term downside of the USD/JPY pair.
A move back under the 142.65-142.60 area would open a potential drop back toward the 142.00 level. Some analysts are saying that if this should happen, then the USD/JPY crosses could drop much more. It could certainly fall down through the mid-141.00s, eventually into the 141.10-141.00 target zone. If the bullish trend continues, bulls could get a chance to regain the 145.00 psychological resistance level.
The upcoming BoJ policy decision is expected to provide insights into the future rate-hike path, which will play a significant role in influencing the Japanese Yen. Additional commentary from the new BoJ Governor will be key for traders looking to position ahead of any monetary policy changes.
In the bigger picture, other forces are coming into play. Recent statements by US President Donald Trump regarding trade negotiations with China have reaffirmed market speculation about the Federal Reserve potentially resuming its rate-cutting cycle in June.
“Very good probability we’ll reach a deal with China.” – US President Donald Trump
That sense of inevitability reflects renewed turmoil in the currency markets. This reflects investor risk aversion and a flight to quality assets, particularly the Japanese Yen, amid increasing global economic uncertainty. As traders await further developments, they remain vigilant in their strategies, balancing potential risks and rewards in this dynamic environment.