The USDJPY pair fell to 160.13 on Tuesday after two highly volatile trading sessions. Investors remain focused on the Bank of Japan's latest monetary policy meeting.
The regulator raised its key interest rate by 25 basis points to 1.0%, the highest level since 1995. The move is intended to help contain inflation and support the national currency, which has been under pressure for most of the year.
In recent weeks, the yen has been actively used in carry trades: investors borrowed funds in the low-yielding Japanese currency and invested them in higher-yielding assets. This increased pressure on the JPY despite the Bank of Japan's gradual policy tightening and Tokyo's repeated monetary interventions.
The main reason behind the yen's weakness remains the significant difference in interest rates between Japan and the United States. As long as US rates remain substantially higher than Japanese rates, the dollar will retain a structural advantage.
The market is also closely monitoring developments in the Middle East.
Investors expect the United States and Iran to sign a deal in Switzerland by the end of the week. If a deal is reached that leads to the reopening of the Strait of Hormuz, it could ease tensions in global markets and reduce demand for safe-haven assets, including the US dollar.
Technical analysis
On the H4 chart, USDJPY has formed a consolidation range around 160.20. After breaking higher, the pair is developing a growth wave structure towards 161.50. Today we expect this target to be reached, followed by a drop towards 160.30. Technically, this scenario is confirmed by the MACD indicator: its signal line is above zero and points firmly upward, reflecting the potential for the continuation of the growth wave.
On the H1 chart, the market is forming a growth structure towards 160.51. After that, a correction towards 160.20 can be considered. The pair is then expected to rise towards 160.70, with the potential to continue the trend towards 161.50.
This scenario is supported by the stochastic oscillator: its signal line is above 50 and moving firmly towards 80, indicating that the short-term bullish potential remains intact.
Disclaimer
Any forecast contained herein is based on the author's personal opinion. This analysis cannot be considered trading advice. RoboForex assumes no responsibility for trading results based on the trading recommendations and reviews contained herein.
By RoboForex Analysis Department
