USD/JPY Hits Inflexion Zone as Hawkish Fed Raises the Bar for BoJ
The Federal Reserve's rate hike and signal of further tightening have reinforced the US dollar's yield advantage over the yen, supporting the USD/JPY currency pair. The Bank of Japan (BoJ) is expected to raise its policy rate by 25 basis points to 1.25%, but Governor Ueda's press conference will be the key catalyst for market reaction.
Traders should focus on whether inflation is becoming domestically sustainable, rather than merely reflecting oil prices and currency weakness. A hawkish message from Governor Ueda would include a clear signal that further rate increases are likely if the economic outlook remains intact, greater concern over second-round inflation effects, and an indication that the policy rate remains below neutral.
The technical analysis of USD/JPY shows that the pair has hit an inflexion zone of 155.03/156.73, with a break below 155.45 triggering a bearish reversal sequence to expose intermediate supports at 154.47, 153.70, and 152.65/55.
However, if USD/JPY clears the 156.50 resistance level, it could squeeze up to test the 157.20 medium-term pivotal resistance, invalidating the bearish scenario.