- USD/JPY presented massive bullishness lately.
- BOJ and Fed policy divergence contributed to the performance.
- The pair created a double-top setup on the 24hr chart.
USD/JPY reclaimed its bullish strength due to the divergence between the Bank of Japan and the Fed Reserve. While publishing this post, the pair traded at 130.53, near its 131.62 year-to-date peaks. It gained over 15% YTD. That made the yen the leading underperforming G7 currency.
BOJ and Fed Divergence
USD/JPY maintained a massive upside trend within the past couple of months as the Bank of Japan and Fed extended their monetary policy divergence. The BLS (Bureau of Labor) announced stable economic figures last Friday.
The data showed the United States economy added more than 390K jobs within the past month, bolstered by services sectors such as restaurants and hotels. Meanwhile, the unemployment rate stayed lower as wages saw a 5.2% hike.
Thus, analysts trust Fed will maintain its hawkish stance as inflation remains at elevated zones. It started increasing rates, and financial experts believe Fed will introduce more 0.50% interest rate hikes.
Furthermore, the Fed began implementing the QT strategy, trimming its holdings by $47 billion every month. Moreover, it will likely double the qualitative tightening program to around $97 billion if the approach proves viable.
Thus, Fed and BOJ maintained different directions. The Bank of Japan plans to retain its dovish stance as the Fed contemplates further hikes. Governor Kuroda hinted at lower rates for a while. For now, USD/JPY will respond to several events on the week.
For instance, Japan will announce overtime pay data and household spending on Tuesday. Also, the country will publish GDP data on Wednesday. Meanwhile, the United States statistic agency will announce consumer inflation figures on Friday.
USD/JPY Prediction
The 24hr chart reveals USD/JPY on massive bullish reaction over the past couple of months. Upside saw the pair moving beyond the 25- and 50-day MAs. Also, the Relative Strength Index retained an upward motion.
Meanwhile, the pair is printing a double-top setup, a bearish signal. Thus, USD/JPY will likely see massive pullbacks in the up-and-coming days. Nevertheless, a move beyond the 131.16 resistance will cancel the double-top setup and welcome more gains.
