Japanese Yen Weekly Forecast: Will USD/JPY Break 151? Key Fed and BoJ Events in Focus
Original article by James Hyerczyk | Source: FX Empire
The Japanese Yen continues to be in the spotlight as investors brace for a week packed with central bank decisions and geopolitical developments. The USD/JPY currency pair is trading near critical resistance levels and will be heavily influenced by upcoming interest rate decisions and policy statements from both the U.S. Federal Reserve and the Bank of Japan (BoJ). This weekly forecast assesses the current market dynamics, outlines what to watch, and discusses the factors that could influence the USD/JPY’s path over the coming days.
Overview of Recent USD/JPY Movement
– The USD/JPY closed the past week near 150.51, showing a modest gain.
– Market volatility remained low due to limited economic data and global market participants adopting a cautious stance ahead of key central bank meetings.
– Traders refused to commit to a strong directional bias, opting instead to await guidance from both the Fed and BoJ.
The Japanese Yen has been under pressure in recent months as the Bank of Japan maintains its ultra-loose monetary policy, in stark contrast to the U.S. Federal Reserve’s relatively hawkish stance. The divergence in interest rates between the two economies has led to sustained weakness in the Yen, despite occasional bouts of risk aversion that typically bolster the safe-haven currency.
Upcoming Economic and Policy Events Impacting USD/JPY
Fed Interest Rate Decision
The Federal Reserve’s next interest rate decision is scheduled for Wednesday, March 20. The central bank is widely expected to leave the federal funds rate unchanged. However, the real market-moving component of the meeting will be the updated Summary of Economic Projections, including:
– The Fed’s dot plot, revealing expectations for future rate paths.
– GDP growth and inflation forecasts.
– Individual members’ thoughts on when rate cuts might begin.
Market consensus currently points toward a potential rate cut in June, though this remains contingent on inflation data and broader economic conditions.
Key considerations from the Fed meeting:
– If updated projections signal three or more rate cuts in 2024, this could weaken the U.S. dollar and allow the Yen to gain ground.
– A hawkish tone or reduced projections for rate cuts could push the USD/JPY pair higher and potentially prompt a retest of the multi-month resistance at 151.
BoJ Monetary Policy Statement
The BoJ will deliver its monetary policy decision on Tuesday, March 19. Market participants are increasingly speculating that this could mark the end of Japan’s negative interest rate era. Several signs point to a shift:
– Recent wage negotiations suggest growing wage pressures in the Japanese economy.
– The possibility of modest inflation gaining traction may incentivize the BoJ to tighten policy for the first time in over a decade.
Potential outcomes from the BoJ meeting include:
1. End of Negative Interest Rates:
– A rate hike to 0% or slightly above.
– This would signal a major policy shift, potentially strengthening the Yen.
2. Guidance on Policy Normalization:
– Even if rates remain unchanged, any and all indications that the BoJ may unwind stimulus could offer JPY support.
3. Retention of Dovish Stance:
– If the BoJ still sees inflation as temporary, they may prefer to wait further.
– In this case, the Yen would remain under pressure, allowing USD/JPY to break higher.
USD/JPY Technical Analysis
Looking at the technical structure, the USD/JPY is testing a key resistance zone between 150.75 and 151.25, a level that has previously triggered verbal intervention from Japanese authorities.
Support Levels:
– Immediate support is located near 149.50.
– Below that, the 148.50 level could offer further downside protection.
– A break below 148.00 may trigger extended selling pressure towards 147.00.
Resistance Levels:
– Resistance lies between
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