USD/JPY retreats from six-year resistance above 125.00 despite BOJ’s unlimited bond-buying program

• USD/JPY is rallying higher as BOJ’s bond-buying program aims to keep interest rates from rising.
• Traders are dumping the JGSs on the expectation of a rise in the US Treasury yields.
• The asset has found a corrective pullback after recording a fresh six-year high at 125.10.

The USD/JPY pair has finally witnessed a barricade at 125.10 amid an ongoing unlimited bond-buying program from the Bank of Japan (BOJ) for the first four days this week, which will help them to defend their yield cap.

The BOJ bought the 10-year benchmark Japanese Government Bonds (JGB) on Monday and is intended to continue buying them till Thursday to keep interest rates from getting elevation bets. Usually, a bond-buying program by the central banks denotes their intention to keep the interest rates from rising while traders are dumping the JGBs on the expectation of higher US Treasury yields amid raising bets on aggressive tightening monetary policy in May.

It is worth noting that the major has been rallying sharply in March and has added 8.70% this month. Failing to elevate interest rates by the BOJ amid capped inflation numbers has brought a wide divergence in the interest rate cycle of the BOJ and other central banks. The defending approach of the ultra-loose monetary policy by the BOJ dictated the major’s price above 125.00. However, a corrective pullback has been observed but it might be capitalized as a buying opportunity by the responsive buyers going forward.

USD/JPY Technical Analysis

On a weekly scale, USD/JPY has witnessed some profit booking after printing a fresh six-year high at 125.10. The Relative Strength Index (RSI) (14) is oscillating in the 60.00-80.00 range, which indicates more upside ahead. The greenback bulls are holding above the 200-period Exponential Moving Average (EMA), which adds to the upside filters.

USD/JPY weekly chart