USD/JPY Rally Faces Resistance Ahead of BoJ Rate Decision
The USD/JPY pair has been experiencing a bullish trend due to higher-highs and higher-lows in short-term price action. Last week's support was built as a higher-low printed on the daily chart after Scott Bessent's warning about USD/JPY, saying he had asymmetric information about the Bank of Japan's actions.
The pair extended its recent rally to run above the 155.00 level after yesterday's hawkish hike from the FOMC. However, fundamentals continue to favor the USD with higher levels of inflation, leading to a need for more rate hikes than what is currently showing in Japan.
Japanese policymakers might want to be proactive due to the country's debt-to-GDP ratio exceeding 200%, making higher government bond yields an even greater vulnerability. The Bank of Japan has historically used experimental monetary policy, including negative rates and yield curve control.