USD/JPY highest since 1986 remained the key theme after the dollar jumped on a more hawkish Federal Reserve outlook and the Bank of Japan kept its gradual policy path.
The Fed’s median dot showed one rate hike this year. The consensus had looked for no cuts or hikes. Moreover, some hawkish members pencilled in more than one increase.
Markets quickly raised tightening bets after the Fed update. Traders now price in 38 basis points of tightening by year-end. There is also a 40% chance of a hike in July and a 72% probability of a move in September.
On the Japan side, the BoJ raised its policy rate to 1.00%, as widely expected. However, it also announced a pause to its bond tapering programme from the next fiscal year.
USD/JPY Highest Since 1986 After Fed Shift
The BoJ kept its forward guidance unchanged. It said it would continue normalisation by raising the policy interest rate and adjusting monetary accommodation in response to economic activity, prices and financial conditions.
BoJ’s Uchida did not add new signals at the press conference. Instead, he repeated that the central bank would raise rates further if economic conditions align. Meanwhile, Japan’s CPI data matched expectations, with all inflation measures below the 2% target.
That policy gap helped keep the pair tilted higher. As a result, USD/JPY moved near its highest level since 1986.
Fed Rate Bets and BoJ Path Diverge
The source article said the pair broke out of consolidation around 160.00 and climbed toward 162.00 after the Fed’s dot plot. It also identified 160.50 as a support zone on the four-hour chart.
In addition, the article pointed to a minor upward trendline on the four-hour chart and another on the one-hour chart. It said buyers may lean on those levels to push for fresh highs, while a break lower could open the way for a pullback toward 160.50 and then 158.00.
The article also said sellers may step in around 162.00, with risk defined above that level, as USD/JPY highest since 1986 keeps the focus on the widening Fed-BoJ divergence.
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