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Bank of Japan Keeps Interest Rate at –0.10%

1/18/2023 2:13 PM

During the Asian session, the USD/JPY pair was growing, retreating from the lows of May 2022, renewed at the beginning of the week, and correcting to the resistance level of 131.00.

Today, the Bank of Japan held a regular meeting on monetary policy, within which the interest rate remained at –0.10%, which coincided with analysts' forecasts, causing the weakening of the yen. The negative dynamics of the currency also contributed to the comments of the head of the regulator Haruhiko Kuroda about the readiness to continue the quantitative easing program while consolidating the yield of 10-year bonds at close to zero levels. The agency announced a revision of its forecasts, which now assume the growth of gross domestic product (GDP) by the end of fiscal 2022 by 1.9%, which is 0.1% worse than the previous estimate, and a slowdown in the country's economy to 1.7% this year, however, the previous forecast for the key interest rate for 2023 remained unchanged. The official separately noted that the regulator would increase monetary stimulus without any doubt if necessary. Thus, the Bank of Japan continues to adhere to the ultra-soft monetary policy.

Now the investors' attention is likely to shift to the position of the US Federal Reserve, and market participants are preparing for the next meeting of the US regulator, which will be held on February 1. On it, the agency is likely to raise the interest rate by 0.25% instead of the previously expected 0.50%, which could weaken the dollar.

The long-term trend is downwards. The support level of 130.90 was broken last week and now acts as resistance, and the next sell target is 126.90. Short positions may be opened from the area of 130.90–131.10.

The medium-term trend is down. Last week, quotes broke the target zone 5 (129.23–128.87), the next target is zone 6 (125.66–125.32), and the trend border is shifting to the area of 132.73–132.21. In case of correction, it will be possible to consider new short positions with the target at this week's low at 127.27.

Resistance levels: 131.00, 134.00, 138.00. | Support levels: 126.90, 123.90.

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