Traders are bracing for plenty of volatility in the Yen in Tuesday’s trading session with the Bank of Japan nearly 90% priced in to make a 25-basis point hike at the culmination of their June meeting to combat continued inflation issues in the economy which have been exacerbated by the conflict in the Middle East. This will take the benchmark up from 0.75% to 1.00% which will represent a 31-year high for Japan’s rates.
Volatility for the Yen will likely come from the forward guidance that the market receives from Bank of Japan Governor Kazuo Ueda and his team in the Policy Statement and consequent Press conference. If the bank signals a more measured approach we could see some pressure on the Yen again, while strong indications of further rate hikes this year will be seen as hawkish and should see the Yen appreciate, something that the bank is strongly in favour of with the currency still trading at weak levels.
USDJPY is sitting nicely from a technical perspective for moves around the interest rate announcement and press conference. Anything more hawkish from the bank should see the Yen appreciate and USDJPY take a hit with a break of short term support at 159.64 likely to open the way for extended moves lower, while a more conservative ‘wait and see’ approach should see the pair push higher with strong resistance levels sitting just 60 pips higher than the current market just under 161.00.
Resistance 2:161.91 – 2024 High
Resistance 1:160.72 – 2026 High and Trendline Resistance
Support 1:159.64 – Trendline Support
Support 2: 156.75 – Long Term Trendline Support
