- USD/JPY regains positive traction on Friday after the BoJ announced its monetary policy decision.
- The BoJ sticks to its ultra-accommodative policy stance and downgrades its economic assessment.
- The Fed’s more optimistic outlook benefits the USD and supports prospects for further gains in the pair.
The pair USD/JPY has come back close to the multi-year high of 119.12 hit a couple of days ago and now looks to build on the momentum above the 119.00 level at the start of the European session on Friday.
After the previous day’s consolidation move, the USD/JPY pair attracted fresh buying on Friday after the Bank of Japan announced its monetary policy decision. As expected, the BoJ stuck to its dovish policy stance and also downgraded the overall assessment of the economy.
The Japanese central bank warned of very high uncertainty due to the economic consequences of the Ukraine crisis and signaled that it will maintain its ultra-loose monetary policy for the time being. At the press conference after the meeting, Governor Haruhiko Kuroda reiterated that the BoJ will ease its monetary policy further without hesitation as needed..
Conversely, the Fed sounded more aggressive on Wednesday and announced the start of the cycle of tightening monetary policies. Furthermore, the so-called dot plot indicated that the Fed could raise rates in the remaining six meetings of 2022 to combat high inflation. The divergent monetary policy perspectives between the BoJ and the Fed acted as a tailwind for the USD/JPY pair.
The bulls also took cues from the high yields on US Treasury bonds. Indeed, the benchmark 10-year US government bond yield remained just below the highest level since June 2019 touched earlier this week. This, in turn, favors the bulls and supports the prospects for an extension of the recent USD/JPY move higher.
Having said that, a weaker tone around equity markets could fuel some safe-haven money flows into the Japanese yen and limit gains for the USD/JPY pair. The lack of progress in ceasefire talks between Russia and Ukraine turned out to be a key factor weighing on investor sentiment and benefiting traditional safe-haven assets.
Therefore, it will be prudent to wait for sustained strength above the 119.00 level before opening new bullish positions around the USD/JPY pair. However, the pair remains on track to post the highest weekly close since January 2016 amid a relatively empty US economic calendar, with the release of existing home sales data.
USD/JPY technical levels
Source: Fx Street
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