- Strong signals from the Bank of Japan about continuing to work on tightening its monetary policy have brought more gains to the Japanese yen against the rest of the other major currencies.
- The performance was clear regarding this in the performance of the USD/JPY pair, which plummeted last week to the 148.92 support level, the lowest for the currency pair in nearly three months, before closing the week's trading stable around the 149.25 level.
- This week in Japan will be a busy week with economic data, with retail sales, industrial production, and housing starts for January at the forefront of the events.
- In addition, Tokyo's inflation data for February will share the spotlight after hawkish signals from Bank of Japan members kept investors attentive to the timing of the next interest rate hike by the Japanese central bank.
In the US, the personal consumption expenditure report and comments from US Federal Reserve officials will be the centre of attention. Personal consumption expenditure prices will provide crucial insights into evolving price pressures, following US consumer price index and producer price index figures that came in higher than expected. US personal spending growth is expected to slow to 0.2%, while personal income is likely to rise by 0.4%, in line with the increase in December.
Meanwhile, the second estimate of GDP growth for the first quarter of 2025 is expected to confirm that the US economy grew at an annual rate of 2.3%, in line with the initial estimate. Additionally, durable goods orders are expected to rise 1.3% after a 2.2% decline in December.
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Trading Tips:
Watch the recent performance of the US dollar against the Japanese yen carefully as it moves towards good buying levels, so be on time to seize the most suitable trading opportunities, but without risk
The Bank of Japan is Ready to Strengthen Bond Purchases
Bank of Japan Governor Kazuo Ueda said that the Japanese central bank is ready to intensify its purchases of government bonds if long-term interest rates rise sharply. Speaking before parliament last Friday, he acknowledged that bond yields fluctuate, but he stressed that the Bank of Japan will move quickly in exceptional cases to ensure stable yield formation. Ueda pointed out that the recent increase in bond yields indicates market expectations for economic recovery in Japan and strengthening core inflation.
The Japanese central bank ended its massive stimulus program, which lasted for a decade last year, which included setting 10-year yields around zero through aggressive bond purchases, as it saw Japan approaching its 2% inflation target. In addition, the Bank of Japan reduced its bond purchases under a plan announced in July, with the aim of halving monthly purchases to 3 trillion yen by March 2026.
USD/JPY Technical Analysis and Expectations Today:
According to trading on the daily chart, the general downward trend of the USD/JPY pair is increasing in strength. As mentioned before, the movement of the currency pair below the psychological support level of 150.00 will strengthen the bears' control over the direction and thus prepare for stronger downward breaches. The technical indicators are now closer to testing strong oversold levels, and this may be confirmed if the bears move towards the support levels of 148.70 and 147.00, respectively. In contrast, and over the same time period, a first break of the downward trend will not occur without moving towards the resistance levels of 152.40 and 154.60, respectively. The path of central bank policies, especially from the Japanese central bank, will continue to affect the performance of the USD/JPY currency pair.
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