Bank of Japan keeps interest rates unchanged

Yen weakens against most major currencies

By Raed Alkhedr | @raedalkhedr | 31 July 2023

USDJPY Library33434
  • Interest rates on the Japanese yen remain steady at -0.1%

  • The Bank of Japan continues to maintain its stimulative policy

  • The USD/JPY pair has successfully broken through the resistance level of 142.00

Economic events impacting the movement of the Japanese Yen

The Japanese yen experienced a noticeable decline at the beginning of today's trading session against most major currencies, following the recent meeting of the Bank of Japan.

During the meeting, the Bank of Japan decided to maintain its interest rates at -0.1%, continuing its accommodative monetary policy. This is in contrast to major central banks that have been raising interest rates to combat increasing inflation rates.

One significant aspect of the Bank of Japan's decision is its directive allowing the 10-year yield to fluctuate around the 0% target with a 0.5% range. In an unexpected move, the bank also stated in its statement that it has taken steps to increase flexibility in its yield curve control policy. This move signals a growing concern about the potential side effects of prolonged monetary easing.

Unlike the US Federal Reserve, which has raised interest rates 11 times since last year, and the European Central Bank, which raised interest rates yesterday for the ninth consecutive time, aiming to reach the highest level in 22 years, the Bank of Japan remains committed to its stimulative policy. It is waiting for signs of more sustainable inflation.

In terms of trading, the US dollar started the week's session on the rise against the Japanese yen. The currency pair is currently trading near the levels of 142.30 Japanese yen.

The pivotal and technical levels affecting the USD/JPY movement

The USD/JPY has successfully broken through the resistance level of 142.00, which previously represented the right shoulder of a bearish head and shoulders pattern. This breakout negates the pattern, suggesting that the pair's upward momentum may continue to test higher resistance levels. The next potential resistance levels are at 144.00, and if surpassed, the pair could further rise to test the peak it reached in July, around the level of 145.00.

If the pair fails to sustain its upward movement and falls below the support level of 141.80, this could indicate a possible downtrend. In such a scenario, the pair may undergo a further decline and test the support level of 139.00. If this support level is broken, it may lead to an extended decline, potentially testing the main support level of the pair around 137.80.

JPY 7-31-2023