The USD/JPY pair surpassed its local daily high of 141.95 on Monday and is currently trading near 143.00.
USD/JPY experienced increased volatility at the end of last week: it initially fell by about 2% on the Nikkei news report that the Bank of Japan (BOJ) might announce the beginning of normalising its "soft" monetary policy but then returned to the area of daily highs after the Bank of Japan announced the meeting outcome.
The BOJ kept the interest rate at -0.1% and did not raise the upper bound of yield on 10-year Japanese government bonds. In its issued statement, it noted that this limit is not a "dogma" but merely a reference serving as a guide to action.
As a result, the expectations of the Bank of Japan winding down its "soft" monetary policy due to rapidly rising inflation have not been confirmed yet. According to Bloomberg surveys, many economists and analysts expect the Bank of Japan to begin normalising monetary policy no earlier than October.
Technical analysis of the USD/JPY currency pair
On the H4 chart of USD/JPY, the calculated target for the fifth upward wave has been reached at 142.44. Today, the market is forming a consolidation range around this level. An expansion to 143.21 is not ruled out. Next, we will consider a decline to the level of 140.66, followed by a rise to 144.62. Technically, this scenario is confirmed by the MACD oscillator. Its signal line is trading above the zero mark and has exited the histogram zone. We expect the indicator to begin decreasing towards the zero level.
On the H1 chart of USD/JPY, a consolidation range has formed around the level of 140.66. After breaking above this range, the local target at 142.44 was achieved. Currently, the market is forming a consolidation range around this level. A potential upward move to the level of 143.23 is not excluded if there is a breakout above this range. In case of a downward breakout, we will assess the probability of a correction to 140.66, followed by a rise to 143.28. Technically, this scenario is supported by the Stochastic oscillator, with its signal line above the 80 mark, preparing to decline towards the 50 mark. After this anticipated decline, we expect another upward movement towards the 80 mark.
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