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USD/JPY Analysis: Japanese Yen Lower for Longer via Dovish BoJ

USD/JPY Analysis: Japanese Yen Lower for Longer via Dovish BoJ

Nick Cawley, Senior Strategist


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USDJPY Price, News and Technical Analysis

  • BoJ remain dovish and lowers inflation expectations.
  • USDJPY break higher could see a fresh 2018 high.

The DailyFX Q3 Forecasts have just been released and cover all the major asset classes.

Bank of Japan Remains Dovish, Lowers Inflation Forecasts

Bank of Japan governor Haruhiko Kuroda inroduced forward guidance at today’s MPC meeting to help the central bank keep their policy framework flexible and achieve the inflation target. Governor Kuroda said that the central bank will keep rates lower for an extended period of time in order to boost price growth. Kuroda also lowered inflation forecasts with full-year 2018 lowered to 1.1% from 1.3%, 2019 to 1.5% from 1.8% and 2020 to 1.6% from 1.8%.

With the Japanese Yen’s upside now seemingly capped by extended BoJ dovishness, USDJPY should push higher, especially if Fed Chair Jerome Powell gives a bullish update on the state of the US economy at Wednesday’s FOMC meeting. The Fed are not expected to hike again tomorrow but are fully expected to raise rates by 0.25% a third time at the September meeting and expectations are running high for a fourth hike at the December meeting. This widening interest rate differential will continue to push USDJPY higher with the only brake on the move seen during bouts of risk-off sentiment.

Fibonacci support at 110.880 should hold in the short-term, allowing the pair to make a run at the May 21 high at 11.390 and the 20-day moving average at 111.672 before a gap opens up to the July 19 high at 113.178.

The IG Client Sentiment Indicator shows that retail are 62% long of USDJPY.

USDJPY Daily Price Chart (December 2017 – July 31, 2018)

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What’s your opinion on USDJPY? Share your thoughts with us using the comments section at the end of the article or you can contact the author via email at or via Twitter @nickcawley1

--- Written by Nick Cawley, Analyst

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.