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USDJPY Hits Four-Month Highs-Could the BoJ Intervene?

USDJPY returned above 151.00 on Wednesday as the market ignored Tuesday’s interest rate hike by the Bank of Japan. Investors have, instead, cast their lots with the US interest rate decision set to be announced on Wednesday. USDJPY traded at 151.706, at the time of writing, on a day that saw the currency pair reach its highest level since mid-November, 2023.

The BoJ raised Japan’s interest rates for the first time since 2007, but the miniscule range of 0.0%- 0.10% has not tickled traders’ ears. The bank admitted on Tuesday that the policy remains ultra-accommodative, meaning that its impacts are unlikely to be immediate. Nonetheless, many analysts expect another rate hike in April.

Meanwhile, the Federal Reserve is hours away from announcing its interest rate decision. Many analysts expect no surprises, and are betting on a retention of the current 5.25-5.5% rate at least until June.  However, the Fed will also be announcing its interest rate projections for the year. This could provide some volatility if the interest rate announcement meets forecasts. Essentially, more interest rate cuts will mean a weaker dollar and vice versa. Furthermore, the Fed will also shed light on its economic projections for the year, and this will also provide fodder for the market.

In the intervening period, the USDJPY trading pair will also continue getting support from high US Treasury yields. Also, yields on Japan’s government-issued bonds fell following the BoJ interest rate decision, exerting more pressure on the yen.  It is also important to remember that the BoJ intervened when the currency pair traded near 151.00 in November 2023. The BoJ is likely to hold off intervening amidst the Fed interest rate sentiment, but a move to 152 could certainly increase the prospects of an intervention.

Technical analysis

USDJPY pivots at 150.75 and the RSI signals a continuation of the upside.  The continued stay of action above the pivot mark could break the resistance at 151.90, which would bring 152.20 within reach. However, a return below 150.75 will favour the sellers. Further control by the sellers will likely break the support at 150.30, invalidating the upside narrative, and potentially creating the momentum to test 150.00.