USD/JPY prediction: Ripe for bearish breakout amid BoJ rumours
- The USD/JPY price declined on Friday amid rumours on the next BoJ governor.
- President Kishida could appoint Kazuo Ueda as the next governor.
- Ueda is a well-regarded technocrat in the BoJ.
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The USD/JPY exchange rate drifted lower on Friday amid high speculation about the next Bank of Japan (BoJ) governor. It dropped to a low of 129.92, which was much lower than this week’s high of 132.91. It remains slightly above the year-to-date low of 127.30.
Bank of Japan next governor
A key forex news of this year is about the BoJ, which is expected to have a new leader in April when Haruhiko Kuroda’s term ends. This will be an important event since Kuroda has been a bigger-than-life figure at the BoJ.
Kuroda’s tenure has been characterised by an extremely dovish tone, which has seen him maintain negative interest rates. He has also embarked on one of the biggest money-printing activity through his quantitative easing policy. Today, the BoJ has seen its balance sheet jump to over $8 trillion. This means that the BoJ has more assets than Japan’s total output, as we wrote here.
The BoJ has done all these with the goal of stirring inflation, which has remained at zero for more than a decade. Recently, however, inflation has picked up and risen to the highest level in decades. This rebound is mostly because of higher oil and gas prices.
As a result, the USD/JPY pair has crashed by more than 13% from its highest point in 2022. Analysts believe that the BoJ will need to be more combative as inflation becomes entrenched in the economy.
The main reason for Friday’s USD to JPY slide was news that the president was inclined to appoint Kazuo Ueda as the next BoJ governor. According to Nikkei, Ueda is a respected BoJ official who has warned about the risks of an early exit from the ultra-loose monetary policy. As such, by appointing a technocrat, Kishida will be adding someone who will focus on economic rather than political issues.
The USD/JPY price has been in a strong bearish trend in the past few weeks. On the daily chart, the pair has formed a death cross, where the 50-day and 200-day moving averages make a bearish crossover. It has also formed what looks like a death cross pattern. The current price is an important one since it was the lowest point on August 2.
Therefore, there is a likelihood that the pair will have a bearish breakout in the coming days as sellers target the key support at 125. A move above the resistance point at 132.64 will invalidate the bearish view.
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