USD/JPY Post-Fed Rebound Brings BoJ Rate Decision in Focus

USD/JPY Outlook

USD/JPY approaches the weekly high (140.31) as Federal Reserve officials project a steeper path for US interest rates, and the exchange rate may attempt to clear the opening range for June as it trades within an upward trending channel.

USD/JPY Post-Fed Rebound Brings BoJ Rate Decision in Focus

USD/JPY appears to have reversed course ahead of the monthly low (138.44) as it retains the advance from the start of the week, and the exchange rate may appreciate ahead of the Bank of Japan (BoJ) meeting as Chairman Jerome Powell reveals that ‘nearly all participants think further rate changes will be necessary.’

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Source: FOMC

The development suggests Fed officials will take additional steps to combat inflation as the majority forecasts a terminal rate above 5.50%, and it seems as though the FOMC will reestablish its hiking-cycle later this year as Chairman Powell emphasizes that the next rate decision in July ‘will be a live meeting.’

FOREX.com Economic Calendar

In turn, USD/JPY may track the positive slope in the 50-Day SMA (136.55) as the BoJ is expected to retain the current policy, and more of the same from Governor Kazuo Ueda and Co. may keep the exchange rate afloat as the central bank continues to carry out Quantitative and Qualitative Easing (QQE) with Yield-Curve Control (YCC).

With that said, USD/JPY may continue to track the ascending channel from earlier this year as the Fed keeps the door open to implement higher interest rates, and the BoJ rate decision may do little to sway the exchange rate as the central bank seems to be in no rush to switch gears.

Japanese Yen Price Chart – USD/JPY Daily

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

• USD/JPY appears to have reversed course ahead of the monthly low (138.44) as it holds above the 138.70 (78.6% Fibonacci extension) to 140.00 (23.6% Fibonacci retracement) region, and the exchange rate may track the positive slope in the 50-Day SMA (136.55) if it clears the opening range for June.
• A move above the monthly high (140.45) may push USD/JPY towards the yearly high (140.93), with the next area of interest coming in around 141.50 (38.2% Fibonacci extension) to 142.50 (61.8% Fibonacci retracement).
• However, USD/JPY may continue to consolidate within the ascending channel if it fails to clear the opening range for June, with a move below the 138.70 (78.6% Fibonacci extension) to 140.00 (23.6% Fibonacci retracement) region raising the scope for a test of channel support.
• Failure to preserve the upward trending channel may push USD/JPY towards the 200-Day SMA (137.26), with the next area of interest coming in around 136.00 (23.6% Fibonacci extension) to 136.70 (38.2% Fibonacci retracement).

Additional Market Outlooks:

USD/CAD Fails to Defend April Low Ahead of Fed Rate Decision

AUD/USD Forecast: Post-RBA Rally Eyes May High

--- Written by David Song, Strategist

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