USDJPY is in focus again this week for foreign exchange traders, as both geopolitical and fundamental factors are set to keep volatility high, and one of the biggest potential movers for the pair is Tuesday’s key interest rate update from the Bank of Japan.
The bank has pulled back from hawkish rhetoric in recent months, with US tariffs increasing uncertainty for Japanese markets, and that uncertainty has increased in the last few days with the conflict in the Middle East between Israel and Iran. Inflation had been a major concern for the bank, but has now taken a back seat to larger economic concerns going forward, and with the market fully pricing in another ‘hold’ at 0.5% from the bank, most FX traders are expecting to see moves in the currency on the back of any forward guidance that we receive from the Monetary Policy Statement and the subsequent Press Conference.
Anything more hawkish from Governor Kazuo Ueda should see the Yen appreciate, with trendline support on the hourly chart around 142.90 likely to provide the initial downside target, whereas a more cautious and less hawkish stance could see the Yen pull back against the dollar, with initial resistance now sitting just under 145.00. Traders are expecting to see substantial moves around the rate call but are also aware that further geopolitical updates could make the impact a more shorter-term opportunity than is normal.
Resistance 2: 145.46 – June High
Resistance 1: 144.96 – Trendline Resistance
Support 1: 142.89 – Trendline Support
Support 2: 142.10 – May Low
