USD/JPY forecast: US GDP data in focus after BOJ decision

The USD/JPY pair tilted lower on Thursday as investors reflected on the Bank of Japan (BOJ) decision. The pair is also falling ahead of the latest US GDP data and the upcoming Japan general election. It is trading at 113.53, which is substantially below this month’s high of 114.70.

BOJ decision

The USD/JPY pair tilted lower after the BOJ decided to maintain its monetary policy as it was. After its two-day monetary policy meeting, the bank decided to leave the interest rate unchanged at -0.10% in a bid to boost the economy. 

The bank will also continue with its asset purchases program that has seen it boost its balance sheet to more than $8 trillion. The BOJ’s stand is different from what the Fed is expected to do in its upcoming meeting.

Analysts believe that the Fed will start tapering its asset purchases by about $15 billion in the coming meeting. They also expect it to sound a bit hawkish about interest rates.

The divergence situation is because of the overall difference between the US and Japanese economies. While US inflation is above 5%, Japan is going through a deflation even as the cost of doing business and energy prices soar.

The USD/JPY will next react to the upcoming Japanese election where Fumio Kishida is expected to win. However, his party will likely lose some seats. The election will take place on Sunday.

Another key catalyst for the USD/JPY pair will be the latest US GDP data that will come out on Thursday. The data is expected to show that the economy grew by about 2.7% in the third quarter after it expanded by 5.7% in the second quarter. The pair will also react to the latest initial jobless claims data.

USD/JPY technical forecast

The three-hour chart shows that the USD/JPY pair has been in a bearish trend lately. The pair is trading at 113.53, which is slightly below 25-day and 50-day moving averages on the three-hour chart. It also seems like it is forming a head and shoulders pattern. 

In technical analysis, this pattern is usually a bearish sign. The pair has also dropped below the Ichimoku cloud. Therefore, there is a likelihood that the bearish momentum will continue.