USD/JPY Daily Chart Analysis – 2023-12-19

The USD/JPY pair experiencing volatility, with a dip from 142.82 to 142.23 on position adjustments, then rising to 143.76 post-Bank of Japan (BOJ) policy announcement.  USD/JPY is now tracking away from the 200-day moving average (DMA), which was at 142.65, suggesting a short-term bullish breakout. 

Fundamental Analysis:

The BOJ’s decision to hold policy steady has provided a boost to USD/JPY, which suggests that the market was not anticipating any changes to monetary policy that could weaken the Yen. This action reaffirms the divergence between the Federal Reserve’s aggressive rate hike path and the BOJ’s ultra-loose monetary policy, maintaining a fundamental bullish outlook for the pair.

The U.S. Treasury yields being on hold with 2-year yields at 4.438% and 10-year yields at 3.925% indicate a pause in factors that could drive the USD side of the pair. However, the Yen’s movement seems to be more influenced by the BOJ’s stance than U.S. yields at this moment.

Cross-currency dynamics also play a role, with JPY crosses moving up post-BOJ announcement. Hawkish comments from European Central Bank (ECB) officials have boosted EUR/JPY, while comments from Bank of England’s (BoE) Broadbent have influenced GBP/JPY, suggesting that the Yen is broadly weaker against multiple currencies, not just the USD.

In summary, the technical indicators suggest bullish momentum for USD/JPY, albeit with potential resistance ahead. Fundamentally, the divergence in central bank policies between the U.S. and Japan continues to support the pair, with recent central bank announcements and cross-currency flows reinforcing this trend.