Hawkish Hold From BOJ

USDJPY is a little softer today after the BOJ meeting overnight saw some hawkish developments. The central bank kept rates unchanged, as expected, but 3 of the nine policymakers were seen dissenting and voting in favour of a hike. Alongside the hawkish voting split, the language used in the meeting statement around future rate adjustments appeared to low the barrier for future hikes. As such, traders have now raised their rate-hike expectations for June in line with the ongoing impact of the Iran war and persistent JPY weakness. Ahead of the meeting we heard Japanese Fin Min Katayama once again warnings speculators that authorities stand ready to take decisive action if needed to prevent excessive currency moves.

Fed Up Next

Looking ahead, focus now turns to the FOMC meeting tomorrow. Traders are expecting a similarly hawkish tone from the Fed which could revive USD buying near-term and push USDJPY higher. With fresh verbal intervention from Japanese authorities, the question is at which point might we see action taken? If USD spikes higher tomorrow in response to any hawkish developments from the Fed, this could prove to the point at which we see Japanese authorities intervene once again, paving the ay for a rate hike at the next BOJ meeting. As such, volatility risks remain elevated near-term.

Technical Views

USDJPY

For now, USDJPY remains rangebound between 158.12 and 160.23. With price still within the bull channel which has framed the push higher over the last year, focus is on a continuation north with 161.99 (2024 highs) the next bull target. If we break lower, however, the next key support level is down at 154.74, with the bull channel lows there also.