USDJPY Shows Signs of Exhaustion Ahead of Japanese Data

USDJPY could mount a surprise as the pair shows signs of being exhausted ahead of the Bank of Japan meeting.

USDJPY: Daily Chart

USDJPY: Daily Chart

USDJPY pushed to 148.50 on the FOMC decision but has since rebounded below support.

Investors will get a look at Japanese inflation ahead of the Friday session, and that will be followed by the Bank of Japan interest rate decision and comments. On inflation, markets are waiting to see if Japan’s recent jump to 3.3% in prices will continue.

The Bank of Japan is expected to end its negative interest rate policy next year, according to a majority of economists in a Reuters poll. None of the economists surveyed saw a chance for the BOJ to roll back its easy policy stance at this week’s meeting, with almost 80% of them saying the central bank will drop the 10-year yield control scheme by the end of 2024.

BOJ Governor Kazuo Ueda told interviewers earlier this month that the central bank may get enough data by year-end to judge whether it should end negative rates. That has traders on edge, waiting for a potential counter trend against the USD.

Thirteen of the 25 economists, or 52%, said they expect the BOJ to end its negative rate policy sometime in 2024. That was up from 41% in an August poll.

The price action in the USDJPY shows that the pair rallied with the FOMC rate decision from the Federal Reserve. The Fed was expected to hold interest rates at their current target range of between 5.25% and 5.5%. But the central bank’s most recent projections indicate that a further quarter-point rate increase is in store for 2023.

“The odds of a final rate hike this year can’t be discounted as the economy continues to defy recession predictions and the job market remains resilient,” said The Street. “Stronger-than-expected projections won’t quite snuff out the chances of a final rate increase in November, based partly on comments from Chairman Jerome Powell late last month at the Fed’s central bank summit in Jackson Hole, Wyoming.”

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