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USD/JPY Technical Analysis: Bears’ Control Continues


At the beginning of this week’s trading, the bears continued to control the direction of the USD/JPY currency pair. This is with losses affecting the support level at 130.53, its lowest in more than a month, and settling around the level of 131.70 at the time of writing. As I mentioned before, the currency pair may remain in its downward path until the reaction from the US Federal Reserve’s policy decisions in light of a severe financial crisis.

The Bank of Japan signaled a cautious stance toward shifting from massive easing ahead of achieving its inflation target, which helped temper market expectations of any major shift in monetary policy at the start of incoming Governor Kazuo Ueda’s tenure. For his part, one of the board members said, according to a summary of opinions on March 9: “The risk of a precipitous change in policy that may lead to missing an opportunity to achieve this achievement should be considered more important than the risk of delay in changing the policy.”



Caution about acting too quickly on tightening within the nine-member Governing Council may mean that Ueda will take some time before making any major shifts in Japanese monetary policy. Ueda, a former member of the Board of Directors of the Bank of Japan, is known for his opposition to ending the zero interest rate policy in 2000.

The last meeting of Governor Haruhiko Kuroda ended ten years before the Silicon Valley fallout and the Credit Suisse crisis became a dominant concern in global financial markets. The summary showed no material difference from the parliamentary hearings in Ueda last month, where the new president reiterated the need for continued easing. BoJ watchers will likely be watching closely whether Ueda takes steps to mitigate the mounting side effects once he takes office on April 9, particularly with regard to the yield curve control program.

In a sign of wanting to send a dovish message amid ongoing speculation about policy adjustments as inflation soared to a four-decade high, the word “continuously” was used three times in the abstract to describe the need for continued monetary stimulus, the most since July 2019.

While the summary indicated that the Bank of Japan’s inflation outlook remained unchanged as the bank expects it to diminish later this year, a number of opinions indicated the risk of an upward surprise. One of them said it was necessary to pay “full attention” to the risk of price increases. Another said that higher-than-expected inflation may persist if Japanese price standards change after a large inflation shock from abroad.

The first Ueda policy meeting has been scheduled for April 27-28.

  • The general trend of the USD/JPY pair is still in a bearish shift.
  • Stability below the support 131.00 will support stronger bearish breaches, and thus will move the technical indicators towards oversold levels.
  • I expect new purchases for the currency pair if it moves towards the support levels 130.75 and 129.00, respectively.

Breaking the resistance 133.70 will be important for the bulls to start controlling the trend. Today, the currency pair will be affected by whether or not investors take risks, and it may remain in the same performance until the reaction to the US Central Bank’s announcement tomorrow.

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