• On Tuesday, the Bank of Japan hiked interest rates for the first time in 17 years.

• BoJ governor Kazuo Ueda vowed to maintain ultra-easy monetary conditions.

• The dollar was weak after Powell held on to his dovish stance.

Today’s USD/JPY outlook is bullish, with the yen weakening in response to BoJ Governor Ueda’s pledge to bolster the economy, meaning the continuation of ultra-easy monetary conditions. Moreover, despite the recent shift in policy, markets expect the BoJ to slow down on further rate hikes.

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On Tuesday, the Bank of Japan hiked interest rates for the first time in 17 years. This was a monumental shift from years of negative interest rates and a dovish stance. However, investors had already priced in such a move. Consequently, the yen plunged after the policy meeting and has weakened.

Furthermore, despite the rate hike on Tuesday, BoJ governor Kazuo Ueda vowed to keep ultra-easy monetary conditions to support the economy. Still, he noted that inflation was rising and the central bank would hike again if necessary.

Additionally, markets now see a slower-than-expected BoJ hiking cycle. A more aggressive shift would have supported Japan’s currency. However, the yen has weakened despite recent dollar weakness. This weakness has raised concerns in Japan, with the Finance Minister warning that the government was closely monitoring FX markets.

On the other hand, the dollar was weak after Powell held on to his dovish stance. Notably, the Fed held rates at the meeting and projected resilient economic performance in 2024. Moreover, Powell maintained that the central bank will cut three times this year. Initially, the dollar weakened, allowing the yen to recover. However, this was only temporary.

USD/JPY key events today

• US initial jobless claims
• US flash manufacturing PMI
• US flash services PMI

USD/JPY technical outlook: Buyers emerge after 150.75 retest.

On the technical side, USD/JPY is in a strong bullish trend, with the price staying above the 30-SMA. Meanwhile, the RSI has continuously risen since it broke above 50, reaching the overbought region. The price recently broke above a strong resistance level at 150.75 and has pulled back to retest the level.

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At the moment, the price is bouncing higher after retesting the 150.75 key level. Therefore, it might make a higher high. The next strong resistance is at the 1.272 Fib extension and 152.00 key levels. The price could pause or break above this level.

https://www.forexcrunch.com/blog/2024/03/21/usd-jpy-outlook-uedas-support-pledge-weakens-yen/