USDJPY tests 200-day SMA resistance after BoJ summary of opinions

The Yen is slightly weaker against the US dollar following the release of the Bank of Japan’s (BoJ) summary of opinions.

Today it was revealed that, at the BoJ’s policy meeting last week, one board member said that the central bank can afford to wait before triggering a rate hike.

That prompted JPY to weaken slightly, as markets pared bets for a BoJ rate hike in January down from 28% to 10%.

The weaker Yen however has been capped at USDJPY’s 200-day SMA for the time being, while this FX pair remains trapped in the downtrend that commenced in mid-November.

Even prior to today’s release of the BoJ’s summary of opinion, economists had largely expected the BoJ to finally exit its negative interest-rates regime only in April 2024.

That scheduled policy meeting would allow BoJ officials enough time to digest the outcome of the spring wage negotiations in March.

Forecasts for a January rate hike had apparently been too eager anyway.

Hence, the relatively muted response in JPY today.

BoJ still intends to hike

To be clear, the BoJ did discuss at its mid-December meeting the prospects of exiting its ultra-loose monetary policy.

The BoJ’s Policy Balance Rate currently stands at minus 0.1%, making it the last central bank in the world to hold on to negative interest rates.

As long as markets can continue to expect an eventual BoJ rate hike in 2024, coupled with rate cuts in the US by the Federal Reserve, that should preserve the downtrend for USDJPY.

From a technical perspective ...

A daily close above the 200-day SMA may see USDJPY next testing resistance around the 143.4 region, where lies the upper downward trendline.

If USDJPY can resume its south-bound travel, Yen bulls are likely gunning for a revisiting of the 140.943 mark against the US dollar, which was USDJPY's intraday low on December 13th.