The Japanese Yen strengthened against the US Dollar on Monday, driven by speculation of a Bank of Japan rate hike. However, the potential impact of Trump's inauguration and its effect on US monetary policy adds uncertainty to the outlook for USD/JPY.
The Japanese Yen (JPY) strengthened against the US Dollar (USD) in early Monday trading, ahead of US President Donald Trump 's inauguration. Speculation about a potential rate hike by the Bank of Japan (BoJ) contributed to the decline in USD/JPY , which traded near 155.60, down over 0.44%. Interest rates in Japan remain among the lowest in the G8, but money markets futures suggest the BoJ might increase borrowing costs from 0.25% to 0.50% on Friday, the first such hike since July 2024.
This move is anticipated following hawkish comments from BoJ Governor Kazuo Ueda and Deputy Governor Ryozo Himino last week, which signaled a shift towards monetary tightening. The December meeting minutes also revealed that board members favored a rate increase.However, the impact of upcoming events on USD/JPY remains uncertain. Trump's protectionist policies, which could lead to inflation, might prevent further easing by the Federal Reserve. This could counter the effects of the BoJ's rate hike and limit the yen's appreciation. US financial markets, including the New York Stock Exchange, will be closed on Monday in observance of both Inauguration Day and Martin Luther King Jr. Day. As a result, liquidity conditions are expected to be thin, with trading resuming on Tuesday. Technical analysis of USD/JPY suggests a bearish outlook in the short term. The pair has fallen below both the Tenkan-sen and the 20-day Simple Moving Average (SMA), opening the possibility of a retracement to the Kijun-sen at 155.65. A further decline could see support at the 50-day SMA at 154.88 and a trendline drawn from the September 2024 lows. Conversely, a break above 156.00 could signal further upside, with targets at the Tenkan-sen at 156.92 and the 20-day SMA at 157.24.
USD/JPY Japanese Yen US Dollar Bank Of Japan Boj Interest Rate Hike Donald Trump Protectionist Policies Martin Luther King Jr. Day Inauguration Day
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