USD/JPY Price Analysis: BoJ Maintains Policy, Yen Plummets

• The Bank of Japan maintained its ultra-loose monetary policy on Tuesday.

• Some investors were waiting for indications of a potential shift away from negative interest rates.

• Some Fed officials are pushing back against market expectations of an imminent rate cut.

The USD/JPY price analysis turned bullish on Tuesday after the Bank of Japan upheld its ultra-loose monetary policy at the end of a two-day meeting. Moreover, the central bank retained its forward guidance, keeping its dovish stance.

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Consequently, the yen dropped over 0.6% against the US dollar after the decision. Notably, this outcome aligned with market expectations. However, some investors were waiting for indications of a potential shift away from negative interest rates by the dovish central bank.

SMBC’s Chief FX Strategist, Hirofumi Suzuki, remarked that there were pre-meeting expectations for policy changes, including modifications in the statement’s wording. Moreover, he noted that the likelihood of a sustained weakening trend in the yen is low. This is due to ongoing expectations for a policy revision between January and March next year. 

Meanwhile, the BoJ said it was ready to implement additional easing measures if necessary, citing extremely high economic uncertainty.

Elsewhere, the US dollar remained largely unchanged at 102.53. Some Fed officials are pushing back against market expectations of an imminent rate cut by the Fed. However, such comments have had minimal impact on market pricing and have not stopped the dollar’s decline.

Chicago Fed President Austan Goolsbee emphasized on Monday that the Fed is not pre-committing to an imminent rate cut. Moreover, the surge in market expectations is inconsistent with the usual functioning of the US central bank.

USD/JPY key events today

Traders will keep absorbing the outcome of the BoJ policy meeting as there won’t be any more major events.

USD/JPY technical price analysis: Bullish sentiment emerges as price clears 30-SMA hurdle

On the technical side, sentiment has shifted from bearish to bullish as USD/JPY has broken above the 30-SMA. Additionally, the shift can be seen in the RSI, which has crossed well above the pivotal 50 mark.

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Notably, the reversal comes after a bullish divergence in the RSI. Sellers weakened when the price reached the 142.02 support level, allowing buyers to push the price above the SMA. However, buyers must break above the resistance trendline for the downtrend to confirm a trend reversal. Moreover, they must make a higher high above the 146.03 key resistance level. Otherwise, sellers might return.

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• Source: https://www.forexcrunch.com/blog/2023/12/19/usd-jpy-price-analysis-boj-maintains-policy-yen-plummets/