- USD/JPY rockets over 1%, recapturing 130.00 and beyond.
- BOJ smashes the yen by doubling down on the bond purchases.
- Focus shifts to US GDP release, as Fed set to hike rates in May.
USD/JPY is accelerating its bullish momentum, having climbed above 130.00 for the first time in 20 years.
The slump in the yen got accentuated after the Bank of Japan (BOJ) backed its ultra-loose monetary policy while doubling down on bond purchases.
The central bank left the key policy settings unadjusted but pledged to buy unlimited bonds at fixed-rate every business day to defend the 0.25% yield cap on 10-year Japanese Government Bonds (JGB).
The BOJ’s dovish stance widened the yield differential between the US and Japan, as the Fed remain on track for double-dose rate hikes at its May and June meetings.
The US dollar keeps rallying higher, aided by the energy turmoil in Europe, as Russian gas producers blackmail cutting off the supplies to Poland and Bulgaria, weighing heavily on the euro. Some of the EU gas producers are looking to give in to Russia’s demand to make payments in roubles.
Meanwhile, China’s covid lockdowns and its impact on the global supply chain, as well as, growth keep investors on the edge, as they seek refuge in the ultimate safety bet, the US dollar.
Traders also prefer to hold the US currency heading into the American Q1 advance GDP release, which is likely to show a slowdown in the world’s biggest economy. A negative print could revive recession fears, ramping up the haven demand for the buck.
Ahead of that, BOJ Governor Haruhiko Kuroda's press conference remains in focus for fresh views on the yen decline.
USD/JPY technical levels to consider
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