trading lower at 155.79 on Friday. Meanwhile, the yen remains under pressure at the end of the week. It is on track to record a second consecutive weekly decline amid continued uncertainty surrounding Bank of Japan (BoJ) policy.
This week, the Japanese government nominated two academics known for favoring loose monetary policy to the BoJ board. Prime Minister Sanae Takaichi, following a meeting with Bank of Japan Governor Kazuo Ueda, expressed concern about the possibility of further interest rate hikes.
In contrast, board member Hajime Takata, who maintains a tougher stance, has called for further tightening of policies. He also indicated that the bank's price stability goal is almost achieved.
Governor Ueda himself noted that the Bank of Japan will carefully evaluate incoming economic data at its March and April meetings, leaving the door open for a possible short-term rate hike.
Economic statistics are also influencing market expectations. Inflation in Tokyo has slowed to its lowest level in more than a year, partly due to government subsidies for public services. This has reinforced expectations that the central bank might refrain from tightening policy in the near term.
Technical analysis
On the H4 chart, USD/JPY is forming a consolidation range around the 156.15 level. A drop towards 155.50 is expected today, after which a corrective move back towards 156.15 could follow. A break above this range could open the way for further gains towards 157.50. On the contrary, a break below the range would indicate a continuation of the bearish movement, initially towards 154.18, with room to extend towards 151.82. Technically, this bearish scenario is supported by the MACD indicator, whose signal line remains above zero but points firmly downwards.
According to the H1 chart, the pair has broken below the level 156.15 and is forming a descending wave towards 155.40. A further correction to 156.15 cannot be ruled out. This short-term bearish bias is confirmed by the stochastic oscillator, with its signal line below 50 and pointing downwards.
Conclusion
USD/JPY is falling amid persistent uncertainty over the Bank of Japan's next policy action. Market expectations are dragged between hawkish signals from some board members and more cautious communication from leaders, bolstered by weaker inflation data in Tokyo. Technical analysis suggests there is room for further declines in the short term, although a corrective bounce remains possible.
By RoboForex Analysis Department
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.
