USDJPY Is Getting Out of Control

BoJ sends JPY to hell

After the Bank of Japan issued its monetary policy decision and restated its dovish position earlier in the day, there was significant pressure on the JPY, pushing the USDJPY pair to fresh 20-year highs above the 131 level.

In reality, the Bank of Japan pledged to maintain its current ultra-loose monetary policy settings and to perform daily operations to sustain its "near-zero" 10-year bond yield objective. This is because the Bank of Japan feels that tightening monetary policy would be detrimental to Japan's underlying economy. 

In a post-meeting news conference, Bank of Japan Governor Haruhiko Kuroda stated that economic risks are currently tilted to the downside and expressed willingness to loosen policy further if required.

Terrible US data

According to figures issued by the US Bureau of Economic Analysis on Thursday, the annualized rate of US real GDP growth in Q1 2022 actually declined 1.4 %. That was a massive failure compared to forecasts of 1.4% annualized growth in Q1, and it reflected a considerable change in trend from Q4 2021's solid 6.9% annualized growth rate. 

Meanwhile, the GDP Price Index for Q1 increased more than predicted, from 7.1% in Q4 to 8.0% in Q1, versus a rise of 7.3% expected. The USD dipped slightly following the data, but the drop was quickly bought. Weakening US growth and rising price pressures will soon to stagflation, possibly the worst economic state - declining growth and high inflation.

The next target for bulls will probably be at 135, where 2002 highs are located. If that level does not stop bulls, the USD might continue toward the highs from 1998 in the 145 region.