The recent decision by the Bank of Japan (BoJ) to raise its benchmark interest rate has sent shockwaves through the financial markets. With the Japanese Yen (JPY) surging against the US Dollar (USD) to its highest level since mid-March, investors are now closely watching how central banks’ policies could affect the USD/JPY pair.
Global central banks have been tightening their monetary policies in response to soaring inflation levels, but the BoJ’s decision to raise interest rates and reduce bond purchases is a significant shift in policy. This move could help narrow the interest rate gap between Japan and other major economies, potentially leading to JPY strength in the mid-term.
USD/JPY Technical Analysis
Despite hitting a multi-year high earlier this year, the USD/JPY pair has started to give up some of its gains. The 61.8% Fibonacci retracement level at 148.58 is a key support level to watch, as a break below could signal further downside towards the 140.00 area.
The future direction of the USD/JPY pair will largely depend on the actions of the Federal Reserve. If the Fed decides to cut interest rates in September and hints at further cuts, the bearish case for USD/JPY will strengthen. On the other hand, if the Fed maintains its current path, the JPY could resume its slide against the USD.
Overall, investors should keep a close eye on central banks’ policies and their impact on the USD/JPY pair, as these developments could have significant implications for global markets and individual finances.