USDJPY is faced with the Bank of Japan interest rate decision ahead on Monday.
The BOJ is still defiant about raising interest rates, but the US dollar is still under pressure.
USDJPY – Daily Chart
The US dollar versus the Yen is trading at 136.67 after finding support at 134. The week ahead could see further gains for the pair, with resistance at 138 and 140.
The Bank of Japan is widely expected to stay with the negative interest rates, which put the bank at odds with the world’s other major central banks. All 47 economists in a Bloomberg survey saw no change in the BOJ’s policy settings, including its 0.25% cap on 10-year bonds.
The Bank of Japan Governor Haruhiko Kuroda said on Friday, “raising interest rates now is not desirable.”
“It is true that the CPI data shows significant price increases. If Japan’s labour productivity rate is estimated to be around 1%, wages must rise by about 3% for inflation to reach our 2% target sustainably.”
Kuroda added, “Very important for the forex rate to move stably reflecting fundamentals.” His comments relate to the BOJ’s efforts to intervene in the exchange rate and strengthen the Yen.
“Our macro-model estimates show that a weak yen has a positive impact on net exports, GDP but the benefits are uneven among sectors.”
“Recent sharp, one-sided yen declines are absolutely undesirable.”
For the US calendar this week, there is consumer confidence and a final GDP reading. That Is unlikely to move the exchange rate, and a Japanese inflation rate on Wednesday will have more chance of sparking movement.
The inflation rate has risen steadily from 0.5% in January to 3.7% in October, so the trend is still upward.
Friday brings a final reading of core inflation for the eurozone, with the number likely to be close to the 5% initial forecast. The euro should continue to see a boost from the ECB comments into next week.
The week closes out with US PCE pricing data and durable goods numbers, followed by Michigan consumer sentiment.
