- Investors have lowered their expectations of rate cuts in the United States.
- Interest rate futures have an 80% chance of a 25bps Fed rate hike.
- Kuroda claimed his stimulus program was half successful.
Today’s USD/JPY forecast is bullish. The dollar gained support on Wednesday as investors lowered their expectations of rate cuts in the United States. There were fewer concerns about a banking crisis, and another stubbornly high inflation reading increased bets of a Fed rate hike.
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Bonds and interest rate futures partially undid the enormous gains they had made after three US banks failed within a short period.
Interest rate futures are placing an 80% chance of a 25 basis point increase in the United States next week.
Haruhiko Kuroda, the Bank of Japan (BOJ) governor, who leaves in April, claimed his ten-year monetary experiment was “half successful.” It involved enormous asset purchases to shock people from a deflationary mindset.
Kuroda shocked the conservative central bank and markets in 2013 by implementing a massive asset-buying program. Along with lowering borrowing costs, his policy aimed to shock the masses from deflation by unleashing a huge monetary stimulus.
Nevertheless, as the beneficial effects started to wane and the BOJ’s massive asset purchases reached their limits, the BOJ turned to a policy targeting interest rates. This began with the decision to implement negative rates in January 2016.
It imposed a cap on long-term rates eight months later as part of a yield curve control (YCC) policy, which is still in effect today.
Experts believe the BOJ will continue to undo Kuroda’s radical stimulus program under Kazuo Ueda’s leadership.
USD/JPY key events today
The release of the Producer Price Index report will provide investors with additional US inflation data. A report on retail sales will also be released, revealing the level of American consumer spending.
USD/JPY technical forecast: Bulls facing strong resistance
The 4-hour chart shows USD/JPY pulling back from the 30-SMA, with the RSI trading slightly above 50. Bulls are gaining momentum, but control still belongs to bears as the price trades below the SMA.
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Bulls have shown strength by pushing the price from the 132.55 support and above the 134.00 resistance. However, this move is still a pullback. Bulls can only take over when the price breaks above the SMA. Otherwise, we might see the downtrend resume and the price breaking below 134.00 and 132.55.
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