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USD/JPY Jumps After BoJ Holds Rates, Trims Growth Outlook
Economic
Summary:
The Japanese Yen weakened sharply after the Bank of Japan kept rates unchanged and signaled no rush to tighten further, pushing USD/JPY to near three-week highs
Buy
TradingUSDJPY
EXP
143.999
Entry Price
149.000
TP
142.000
SL
144.662 -0.732 -0.50%
0
Point
Flat
142.000
SL
CLOSING
143.999
Entry Price
149.000
TP
The Japanese Yen weakened broadly on Thursday, sending the USD/JPY pair soaring nearly 0.8% to touch a fresh three-week high around 144.80 during the European session. The move came in response to the Bank of Japan’s (BoJ) latest policy decision, which left interest rates unchanged at 0.5% and struck a notably dovish tone regarding the pace of future rate hikes. As the BoJ doubled down on its cautious stance, the Yen fell out of favor, allowing the U.S. Dollar to capitalize on policy divergence despite softening ahead of key American manufacturing data.
At the heart of the Yen’s slump is the BoJ's continued reluctance to tighten monetary policy aggressively—an approach that increasingly isolates it from global peers, particularly the U.S. Federal Reserve. While the Fed continues to signal higher-for-longer rates amid sticky inflation, the BoJ appears more concerned about preserving economic stability than curbing inflation swiftly.
In a widely anticipated move, the BoJ opted to maintain its short-term policy interest rate at 0.5% during its April meeting. However, what rattled markets more was the central bank’s downward revision of its GDP growth forecast for the fiscal year ending March 2026—from a previous 1.1% to just 0.5%. The downgrade reflects heightened concern about economic headwinds, including the lingering impact of global trade tensions and a weakening domestic growth trajectory.
“We will enter a period in which both inflation and wage growth will likely slow somewhat,” BoJ Governor Kazuo Ueda said in a post-meeting press conference, as reported by Reuters. “But we expect a positive cycle of rising wages and inflation to continue due to a severe labour shortage.” Ueda’s comments underscore the central bank’s preference for a wait-and-see approach, relying on structural labor tightness rather than policy levers to stimulate inflation.
Notably, the BoJ also cited potential risks from additional U.S. tariffs, referring to measures introduced by President Donald Trump on April 2 that could weigh on Japan’s trade sector. The central bank’s tone suggests that it is increasingly wary of geopolitical and external shocks, further reducing the likelihood of imminent rate hikes.
The policy divergence between Tokyo and Washington continues to be the primary narrative driving USD/JPY higher. While the BoJ is scaling back its growth projections and emphasizing patience, the Federal Reserve is grappling with inflation that remains above its 2% target. Although the U.S. Dollar gave up some of its earlier gains ahead of the final S&P Global Manufacturing PMI data due later today, the broader trend remains supportive of further USD/JPY upside.
The greenback’s slight retreat appears to be a case of market consolidation rather than a reversal, as traders brace for fresh macroeconomic clues from the U.S. The April manufacturing PMI data will offer insight into whether America’s industrial activity is regaining momentum or slipping under the weight of high borrowing costs. Stronger-than-expected data could reinvigorate expectations for another Fed rate hike or delay in the timing of potential cuts, reinforcing USD strength.
Technical Analysis
From a technical perspective, the USD/JPY pair remains firmly within a bullish corrective trend. Price action continues to hover above the 50-period Exponential Moving Average (EMA50), a sign of sustained upward momentum in the short term. The current rally appears resilient, bolstered by persistent buying interest and the pair's position above a crucial psychological support level at 144.00.
However, a note of caution arises from the Relative Strength Index (RSI), which is flashing early signs of overbought conditions. The RSI has edged into elevated territory, typically associated with potential fatigue in a rally. While this doesn’t necessarily indicate an imminent reversal, it could limit upside potential in the very near term.
Still, as long as the pair remains above the 144.00 threshold, the bullish outlook stays intact. The next key resistance level to watch is around 149.00—a level that, if breached, could pave the way for a return to the multi-decade highs last seen in late 2023.
TRADE RECOMMENDATION
BUY USDJPY
ENTRY PRICE: 144.00
STOP LOSS: 142.00
TAKE PROFIT: 149.00
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