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The BOJ has officially exited its negative interest rates era!
But why did USD/JPY pop up and just how high can it go?
Before moving on, ICYMI, yesterday’s watchlist looked at AUD/JPY testing resistance ahead of the RBA and BOJ decisions. Make sure to check out if it’s still a valid play!
And now for the headlines that rocked the markets in the last trading sessions:
Fresh Market Headlines & Economic Data:
U.S. NAHB housing market index recovered from 48 to 51 vs. consensus at 48 to reflect return to a favorable outlook for March
New Zealand Treasury report noted that the country is in the middle of a “severe economic slowdown”
RBA kept interest rates on hold at 4.35% as expected, but removed wording on “future hikes” and mentioned that “the Board is not ruling out” when it comes to ensuring inflation returns to target
RBA Governor Bullock reiterated during press conference that they are making progress in the fight against inflation
BOJ hiked interest rates from -0.10% to +0.10% while ending its yield-curve control program and discontinuing ETFs and J-REITs purchases, marking a pivotal shift in policy bias
Japanese industrial production for January upgraded from -7.5% slump to a 6.7% decline month-over-month
Price Action News
Overlay of JPY vs. Major Currencies Chart by TradingView
The Bank of Japan’s (BOJ) interest rate hike out of negative territory seems to have been widely expected, as the announcement generated a bearish reaction from the Japanese currency.
Traders likely booked profits off their earlier long JPY positions anticipating this hawkish announcement and are now turning their attention to possibly cautious remarks in the upcoming presser.
The yen chalked up its sharpest losses versus the dollar, taking USD/JPY close to the 151.00 major resistance level, then the Loonie which is also drawing support from higher oil prices.
Meanwhile, the RBA decision came in line with market expectations but still triggered volatility for AUD pairs when the central bank removed wording on “future hikes.”
Upcoming Potential Catalysts on the Economic Calendar:
Swiss SECO economic forecasts at 8:00 am GMT
German and eurozone ZEW economic sentiment indices at 10:00 am GMT
Canadian CPI reports at 12:30 pm GMT
U.S. building permits and housing starts at 12:30 pm GMT
New Zealand GDT auction coming up
PBOC prime loan rate setting at 1:15 am GMT (Mar. 20)
Use our new Currency Heat Map to quickly see a visual overview of the forex market’s price action! ️
USD/JPY 1-hour Forex Chart by TradingView
While some market participants were surprised to see the BOJ hike interest rates for the first time in ages, yen pairs appeared to stage a “buy the rumor, sell the news” bearish reaction to the announcement.
But can USD/JPY sustain its climb past the strong resistance just below the 151.00 major psychological mark near R1 (150.89)? Or will pre-FOMC jitters eventually cause the pair to retreat to support zones at 149.00 then the pivot point level (148.21)?
Leave your thoughts in the comments section below!
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