The recent release of the Bank of Japan’s summary of opinions has been accompanied by some bearish comments from policymakers at the BoJ. However, Deputy Governor Shinichi Uchida has made efforts to soften some of Governor Ueda’s more aggressive remarks, ultimately aiding in market stabilization. The BoJ acknowledges that the probability of reaching the inflation target has risen, but also anticipates some upward pressure. The Central Bank projects that inflation will reach the target by the second half of 2025. This projection presents an intriguing opportunity for market participants and could potentially position the Yen favorably in the coming year.
As central banks around the world continue to cut rates, the BoJ is taking a different approach by planning to tighten and raise rates. This shift in policy could potentially propel the Yen to the forefront of gains in 2025. While there is undoubtedly a significant journey ahead, the BoJ’s plans are something that market participants should closely monitor. In the short term, Yen pairs remain interesting but are facing some downside pressure. Geopolitical concerns could also play a role in bolstering the Yen’s position in the market.
From a technical perspective, the USD/JPY pair has rebounded strongly and formed an imperfect morning star candlestick pattern. While this pattern typically signals a bullish move, there are still various factors that need to be considered. Price action on the H4 chart has shown higher highs and higher lows since hitting a low at 141.67, indicating a potential return to the 150.00 level in the near future. However, a bearish move could be invalidated by an H4 candle closing below the recent lower swing high at 144.25, potentially leading to a retest of the psychological support level at 140.00. Resistance levels for the USD/JPY pair are seen at 148.00 and the psychological level of 150.00.
The GBP/JPY pair is following a similar pattern to the USD/JPY chart, currently trading just above the significant support level at 185.00. While bulls are currently in control, a break and close below 183.30 could invalidate the bullish structure and lead to a retest of recent lows, possibly targeting the 175.00 level. On the upside, resistance levels for GBP/JPY are found at 187.65, 190.00, and the descending trendline around 192.00.
Once again, the EUR/JPY chart mirrors the patterns seen in USD/JPY and GBP/JPY, with the daily chart displaying an imperfect morning star candlestick pattern. The pair has tested the support area around 159.00 before bouncing back to 159.66. A potential bearish trend could be invalidated by a candle close below the recent lower swing high at 157.50, leading to a retest of recent lows near 154.40. Support levels for EUR/JPY can be found at 156.72, while resistance lies at 160.00 and 161.86, with a critical zone at 163.51. This level also aligns with the 200-day moving average, adding to its significance in determining market direction.
As the Bank of Japan’s policies and market expectations continue to evolve, it is essential for traders and investors to closely monitor these developments and adjust their strategies accordingly. The geopolitical landscape and global economic conditions will also play a significant role in shaping the future movements of major currency pairs involving the Yen.
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