Decline in Japanese yen against major currencies

Bank of Japan maintains current monetary policy without changes

By Raed Alkhedr | @raedalkhedr | 20 June 2023

  • The Bank of Japan has decided to maintain the interest rate at -0.10%

  • The Governor of the Bank of Japan mentioned the possibility of an economic contraction

  • The USD/JPY currency pair has successfully reached a level of 142.00 points

Economic events affecting the Japanese yen

The Japanese yen has experienced a significant decline against most major currencies since the conclusion of last week's trading, following the Bank of Japan's decision on monetary policy. In line with market expectations, the Bank of Japan has chosen to maintain its current monetary policy without implementing any changes. The interest rate will remain at -0.10%, and the policy target for controlling the yield curve of 10-year government bonds will remain at 0.00%.

Kazuhide Ohnishi, the governor of the Bank of Japan, noted a discrepancy between the inflation trend, which represents the average or expected rate of inflation over extended periods, and the core inflation. Ohnishi further emphasized the importance of policymakers considering the overall picture instead of solely focusing on average price expectations.

Moreover, the Governor of the Bank of Japan highlighted the potential negative impact of a future US interest rate hike, including the possibility of an economic contraction. In the ongoing trading session, the US dollar exhibits slight weakness against the Japanese yen during the second session of the week, with the pair trading near 141.62 yen.

Key pivot and technical levels affecting the USD/JPY

The USD/JPY pair has successfully achieved the anticipated target mentioned in the previous report, reaching the level of 142.00 points. However, the pair was unable to surpass this level and has retraced, currently trading around the 141.50 level. There is a likelihood that this correction will persist, with a potential test of the support level at 140.50. A breach below this support level could further extend the correction towards the stronger support level at 138.50, which is crucial to maintain as it indicates a potential resumption of an upward trajectory.

The pair manages to surpass the resistance level of 142.00-142.30, it may contribute to additional upward movement, testing the resistance level at 145.50. Surpassing this resistance level could lead to further upward momentum, potentially reaching the range of 149.00-150.00. Overall, the pair continues to exhibit a bullish trend in the short and medium term, and it is imperative to uphold the support level of 138.50 in order to sustain this trend.

jpy 6-20-2023