Japanese Yen Forecast: Post-BoJ Rebound Keeps USD/JPY Above July Low

Japanese Yen Outlook: USD/JPY

USD/JPY bounces back from a fresh weekly low (138.07) following the kneejerk reaction to the Bank of Japan (BoJ) interest rate decision, and the exchange rate may track the positive slope in the 50-Day SMA (140.96) as it reverses ahead of the monthly low (137.24).

Japanese Yen Forecast: Post-BoJ Rebound Keeps USD/JPY Above July Low

USD/JPY halts a four-day selloff as the BoJ now plans to ‘conduct yield curve control with greater flexibility, regarding the upper and lower bounds of the range’ and it seems as though the central bank will retain the current course for monetary policy as Governor Kazuo Ueda and Co. pledge to ‘patiently continue with monetary easing while nimbly responding to developments in economic activity and prices as well as financial conditions.’

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The varying approach between the BoJ and Federal Reserve may keep USD/JPY afloat as Chairman Jerome Powell warns that ‘the process of getting inflation back down to 2 percent has a long way to go,’ and developments coming out of the US may sway the exchange rate over the coming days as the Non-Farm Payrolls (NFP) report is anticipated to show another rise in employment.

US Economic Calendar

FOREX.com Economic Calendar

The US economy is anticipated to add 184K jobs in July following the 209K expansion the month prior, and a further improvement in the labor market may push the Federal Open Market Committee (FOMC) to further combat inflation as the central bank remains ‘committed to bringing inflation back to our 2 percent goal.’

Source: CME

However, the CME FedWatch Tool shows a greater than 60% probability of seeing US interest rates unchanged over the remainder of the year, and a weaker-than-expected NFP report may encourage Chairman Powell and Co. to adjust the forward guidance at the next meeting in September as the central bank is slated to update the Summary of Economic Projections (SEP).

Until then, waning expectations for higher US interest rates may produce headwinds for the Greenback as the FOMC appears to be nearing the end of its hiking-cycle, and speculation surrounding Fed policy may influence USD/JPY as the BoJ continues to carry out Quantitative and Qualitative Easing (QQE) with Yield-Curve Control (YCC).

With that said, the opening range for August is in focus as USD/JPY halts a four-day selloff, and the exchange rate may attempt to track the positive slope in the 50-Day SMA (140.96) as it reverses ahead of the monthly low (137.24).

Japanese Yen Price Chart – USD/JPY Daily

Chart Prepared by David Song, Strategist; USD/JPY on TradingView

• USD/JPY bounces from back a fresh weekly low (138.07) to halt a four-day selloff, and the exchange rate may attempt to track the positive slope in the 50-Day SMA (140.96) as it holds above the monthly low (137.24).
• A break/close above the 141.50 (38.2% Fibonacci extension) to 142.50 (61.8% Fibonacci retracement) zone brings the June high (145.07) back on the radar, with the next area of interest coming in around 145.90 (50% Fibonacci extension) to 146.70 (78.6% Fibonacci retracement).
• Nevertheless, failure to break/close above the 141.50 (38.2% Fibonacci extension) to 142.50 (61.8% Fibonacci retracement) zone may generate range-bound conditions, but failure to hold above the 138.70 (78.6% Fibonacci extension) to 140.00 (23.6% Fibonacci retracement) area may spur another run at the July low (137.24).

Additional Market Outlooks:

EUR/USD Post-Fed Bounce to Benefit from Hawkish ECB Rate Hike

Gold Price Holds Above 50-Day SMA Ahead of Fed Rate Decision

--- Written by David Song, Strategist

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