• On Friday, the BoJ held rates as expected, lending room to the USD/JPY price.

• Traders panicked when the yen suddenly jumped for no apparent reason.

• The US GDP increased by 1.6% in Q1, missing forecasts.

The USD/JPY price analysis remains bullish as the spike down quickly returned amid the BoJ’s inaction. Meanwhile, there was caution ahead of US inflation data that might shape the outlook for Fed rate cuts.

On Friday, the BoJ held rates as expected. Moreover, policymakers noted that inflation was on a clear path to the central bank’s 2% target. This means the BoJ will likely hike interest rates later in the year. However, investors were disappointed as there was no clear message on the policy outlook. As a result, the yen plunged, allowing the USD/JPY pair to breach the $156.00 level.

After the policy announcement, there were concerns that Japan would intervene to support the weak currency. Therefore, traders panicked when the yen suddenly jumped for no apparent reason. However, the move soon reversed itself. The last time the BoJ sold dollars to support its currency was in 2022. The recent weakness to 34-year lows has increased speculation that the central bank might intervene again in 2024.

The USD/JPY price rose despite a weaker dollar. Notably, the dollar was weak after data from the previous session revealed a bigger-than-expected decline in economic growth. In Q1, the GDP increased by 1.6%, missing forecasts for an increase of 2.4%.

A slowdown in the economy increases the chances that the Fed will cut interest rates. However, the inflation figures in the report revealed a different story. Underlying inflation jumped, leading to a significant drop in Fed rate cut expectations. Investors will now watch the core PCE price index for more clues on the Fed’s policy outlook.

USD/JPY key events today

• BOJ press conference
• US core PCE price index
• US consumer sentiment

USD/JPY technical price analysis: Bullish momentum holds within the channel

On the technical side, the USD/JPY price has made a volatile candle that has tested its channel’s support and resistance. At the same time, it retested the 30-SMA support. However, the bullish bias remains intact since the candle has stabilized above the previous candle.

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The price now sits above the 156.00 critical level and might soon reach the 157.00 resistance. However, the RSI is well above 70, showing the price is overbought. Therefore, it might pause or pull back before it continues higher.

https://www.forexcrunch.com/blog/2024/04/26/usd-jpy-price-analysis-bojs-inaction-weakens-yen/