Daily Analysis USDJPY - 27 July 2023

Investors are closely observing Japan's ultra-loose monetary policy as the Bank of Japan (BoJ) prepares to announce its interest rate decision. Expectations are that the BoJ will maintain its current monetary policy, which includes keeping short-term interest rates at -0.1% and 10-year bond yields at 0%. Japan's core inflation rate has surpassed that of the United States for the first time in eight years, indicating that policymakers may continue to adopt a cautious approach to ensure inflation remains above 2%. The differing monetary policies between the BoJ and the Federal Reserve could put pressure on the Japanese Yen relative to other major currencies, potentially impacting the USD/JPY pair. On the other hand, the US Dollar has weakened after the Fed raised interest rates to a target range of 5.25%–5.5%. Federal Reserve Chairman Jerome Powell mentioned the possibility of further rate hikes, but this could limit the potential for the US Dollar to strengthen further. Market participants will be closely monitoring upcoming US economic data and the BoJ meetings scheduled for Friday.

Technically, USDJPY continues to move downwards, forming a second leg in the long-term downtrend. The next support level is at 138.70, followed by 137.70.

Resistance 3	Resistance 2	Resistance 1	Support 1	Support 2	Support 3
142.00	141.20	140.22	138.70	137.70	135.50