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The USD/JPY pair trades sideways in a narrow range around 151.30 in the London session on Thursday. The asset is expected to remain stuck in a tight range as investors are expected to build fresh positions after getting more clarity on the Bank of Japan’s stealth intervention plans in the FX domain to support weakening Japanese Yen. Also, the United States core Personal Consumption Expenditure Price Index (CPE) data, which will be published on Friday, is expected to keep investors on the sidelines.
The annual inflation gauge is expected to have grown at a steady pace of 2.8%. The monthly underlying inflation data is forecasted to have increased slowly by 0.3% from January’s reading of 0.4%. Investors will keenly focus on the inflation data to gauge when the Federal Reserve (Fed) may begin trimming interest rates.
An asset-specific action is observed in global markets as risk-sensitive currencies have been hit hard amid uncertainty ahead of US core PCE for February. While S&P 500 futures are unchanged. The US Dollar Index (DXY) refreshes six-week high at 104.72. 10-year US Treasury yields have rebounded to 4.23%.
The US Dollar strengthens as Fed Governor Christopher Waller’s commentary on the interest guidance negatively impacts Fed expectations for rate cuts in the June meeting. Fed Waller said there is no need to rush for policy rate cuts due to sticky price pressures and a strong economic outlook. Waller added, “Further progress expected on lowering inflation "will make it appropriate" for the Fed to begin reducing the target range for the federal funds rate this year," reported Reuters.
The expectations for BoJ’s intervention in the FX domain have increased as investors lack confidence that Japan’s central bank will not be able to move forward with positive interest rates due to an uncertain wage growth outlook. However, the summary of opinions at the BoJ's March meeting, released on Thursday, showed that many policymakers saw the need to go slow in phasing out ultra-loose monetary policy, Reuters reported.
Speculation over Japanese FX intervention remains high. Economists at ING analyze the USD/JPY outlook after the pair touched a multi-decade high near 152.00 on Wednesday.
We suspect Japanese authorities would pull the trigger were USD/JPY to burst through the 152.00 area, intervening perhaps somewhere in the 153.00-155.00 range.
With US interest rate volatility collapsing and much demand for the carry trade, it is, however, hard to see much of a market-led move lower in the USD/JPY pair.
USD/JPY is trading sideways near 151.35. Economists at Société Générale analyze the pair’s outlook.
USD/JPY is in vicinity to the upper limit of its range since October 2022 near 152.00 which has remained a crucial graphical level.
Daily MACD is anchored within positive territory denoting prevalence of upward momentum.
The pair has evolved within a brief pause since last week; the lower end of this consolidation at 150.20 is first support.
In case the pair overcomes 152.00, the uptrend is likely to extend. Next potential objectives could be located at projections of 153.10 and 155.50.
The Japanese Yen (JPY) continues to languish. Economists at Scotiabank analyze USD/JPY outlook.
We forecast USD/JPY easing to 140.00 in H2. This is predicated primarily on the USD responding negatively to easier Fed monetary policy.
The onerous carry makes long JPY positions prohibitive unless market participants feel the JPY is poised to rally strongly and in quick order.
A rapid move higher in the JPY is possible – but perhaps only once traders are convinced that a Fed policy pivot is imminent.
The USD/JPY pair finds intense selling pressure near historic highs of 152.00 in Wednesday’s late American session. The asset falls sharply after Japan’s Finance Ministry reported that The Bank of Japan, Ministry of Finance (MoF) and Financial Services Agency (FSA) are scheduled to hold a tri-party meeting.
This has deepened hopes of a stealth intervention by Japanese authorities into the FX domain to limit further downside in the Japanese Yen. Also, commentary from top currency diplomat Masato Kanda that he "won't rule out any steps to respond to disorderly FX moves" has reinforced expectations of Japan’s intervention against excessive currency moves.
The Japanese Yen has faced significant pressure in the last few trading sessions despite the BoJ exiting negative interest rates. It appears that investors are less confident about the BoJ’s move to policy normalization due to the absence of evidence about a wage growth spiral. Apart from that, investors hope that the BoJ’s move to further policy normalization will be very slow.
Meanwhile, the US Dollar is upbeat ahead of the United States core Personal Consumption Expenditure Price Index (PCE) data for February, which will be published on Good Friday. Trading volume is expected to remain low in that session as US equity and bond markets will remain closed.
The annual core PCE inflation is estimated to have grown steadily by 2.8%, with monthly growth declining to 0.3% from 0.4% in January. The US Dollar Index (DXY) is far from recapturing the monthly high of 104.50.
USD/JPY is trading back in the lower 151.000s on Wednesday after rising up to a new high of 151.970 during the Asian session, its highest level for decades.
The rapid reversal has been put down to intervention by the Japanese authorities who do not wish to see the Japanese Yen (JPY) depreciate any further.
Such a strong reversal over the course of one day has a special term in technical analysis – it is called a “Key Reversal Day”.
Key Reversal Days are a sign a major reversal in price is on the horizon. It is defined as a day in which price rises up to a new long-term high before rolling over and closing below the low of the previous day (rectangled). The sudden shift in sentiment is indicative of a sea-change in the fundamental outlook for the asset’s price.
US Dollar versus Japanese Yen: Daily chart
If USD/JPY can maintain its current losses until the end of the day on Wednesday, it will have achieved a Key Reversal Day and may be in line for more losses to come. If it fails to close below Tuesday’s lows at 151.207 it will fail to meet the criteria for a key reversal.
A Key Reversal happened on the S&P 500 index on October 11, 2007 at the peak of the stock market rally just prior to the Great Financial Crisis.
It marked the peak price the S&P 500 achieved before the bear market that followed the banking crisis.
S&P500: Daily chart
Although this subtle though important clue of future weakness largely went unnoticed by most investors, a few technical analysts brought it to attention at the time!
The most notable moves in G10 since the start of the week have been the further sell-off in G10 low-yielders: Swiss Franc (CHF) and Japanese Yen (JPY). Economists at ING analyze CHF and JPY outlook.
CHF has been a bigger underperformer, with a dovish Swiss National Bank that no longer targets a stronger CHF adding pressure on the currency, and we think it may be too early to pick a bottom.
USD/JPY touched 152.00, continuing to test Japan’s FX intervention tolerance. This may still be only a ‘verbal intervention’ range, with another USD/JPY leg higher needed for actual FX intervention to be deployed (perhaps closer to 155.00). Remember that Japanese authorities look at the rate of change more than levels.
USD/JPY rallied briefly to a fresh high at 151.97. Economists at BBH analyze the pair’s outlook.
Japan’s Finance Minister Shunichi Suzuki warned again ‘we are watching market moves with a high sense of urgency…We will take bold measures against excessive moves without ruling out any options’. The BoJ last officially intervened to stem JPY weakness between September and October 2022.
In our view, it’s only a matter of time before USD/JPY breaks higher because we anticipate a gradual BoJ tightening process and a more muted than currently priced-in Fed easing cycle.
The next major technical resistance for USD/JPY after the 151.95-152.00 zone is not before 160.00 (April 1990 high).
USD/JPY is trading in the 151.300s on Tuesday, little changed from the previous session as it enters a stalemate zone below multi-year highs.
The pair is trapped in a narrow consolidation as both sides of the trade suffer from paralysis.
Bulls are paralyzed by the fear of intervention from the Japanese authorities and bears by the potential for the US Dollar (USD) to excel given the above-average performance of the US economy, as well as fading hopes of an early interest-rate cut by the Federal Reserve (Fed).
Institutional analysts are generally bearish about USD/JPY in the medium-to-long run. They mostly view interest-rate cuts by the Fed as inevitable – a question of when not whether. There is also an increasing consensus that there will be more interest-rate hikes from the Bank of Japan (BoJ).
According to a Bloomberg survey of economists, the majority believe the BoJ will raise interest rates again in October, if not before.
In contrast the Fed is expected to cut as soon as June, with a probability of 69.9% rates will come down in that month, according to the CME FedWatch tool.
“We think the US-Japan yield differential is set to narrow, this, among other factors, should provide support for the JPY,” say economists at HSBC.
The Yen is destined to rise across the board, in fact, as global inflation comes down and central bank easing gains momentum, according to analysts at MUFG.
"When global yields do start to move lower, the stance of the BoJ will certainly reinforce the scale of yen appreciation,” they say in a recent note.
The yen could fall to the 140.000 level once the reversal gets underway and the yield spread between the US and Japan narrows.
“We still see scope for USD/JPY to drop to at least 140.00 by year-end with risks of a move to the mid-130.00’s,” adds MUFG.
ING are not as convinced USD/JPY will go lower arguing such a move would be dependent on the US Federal Reserve cutting interest rates, something still not guaranteed.
“A recovery in JPY remains even more strictly tied to US rates breaking lower."
Many were taken off guard by the Yen’s counter-intuitive move following the BoJ’s March meeting. For the first time since 2007 the bank decided to raise interest rates. Normally this would be expected to strengthen a currency substantially, especially after such a long delay. Yet in the case of the Yen, the opposite was true.
Some put it down to the move being too widely telegraphed prior to the meeting, causing a “buy the rumor sell the fact” trade, whilst others suggested the Yen fell because the rate hike was a case of a “one and done”.
Japan’s FX chief Masato Kanda put the Yen’s eccentric devaluation down to speculators playing a contrarian trade to make a quick killing. Indeed, data from the Commodity Futures Trading Commision (CFTC) shows large speculators such as hedge funds loading up their short bets on the Yen in the week of the BoJ decision.
Eventually, the explanation that seems the most reasonable is that despite the rise in Japanese interest rates from negative 0.1% to a range between 0.0% and plus 0.1%, they remain extremely low in comparison to other countries. This means the Yen still “remains the most popular funding currency for carry trades,” according to FX strategists at ING.
The carry trade is an operation by which traders borrow in a “funding currency” such as the Yen, to buy a currency with a higher interest rate, such as the New Zealand Dollar (5.5%) or US Dollar (5.5%).The profit lies in the difference between the cost of the interest repayments and the interest earned at the higher rate – assuming a constant exchange rate.
USD/JPY navigates in the upper end of the recent range north of the 151.00 mark amidst some renewed weakness in the Greenback and rising US yields.
The pair trades in an irresolute tone at the beginning of the week on the back of the resurgence of the downward bias in the US Dollar and in a context of prevailing appetite for the risk-linked galaxy.
In addition, US yields manage to regain some balance following many sessions of losses, while JGB 10-year yieds print humble gains near 0.75%.
In the meantime, as the pair gets closer to the 152.00 hurdle, fears of FX intervention by the BoJ and/or the government appear to limit the upsit potential in spot. On this, according to Vice Finance Minister for International Affairs, Kanda, the recent depreciation of the Japanese yen is not aligned with the underlying economic fundamentals and appears to be driven by speculative activities. Kanda issued a stern warning, stating, "We are prepared to intervene to address excessive fluctuations, with all options on the table."
On the domestic calendar, the BoJ published its Minutes of its March 19 gathering, noting that the central bank is gradually moving towards a phase of tightening, as board members recognize the potential for adjusting monetary policy and acknowledge the probability of maintaining accommodative financial conditions, even as measures like ending negative interest rate policy are implemented.
So far, USD/JPY is up 0.06% at 151.40 and faces the next resistance at the 2024 peak of 151.86 (March 22) ahead of the 2023 high of 151.90 (November 13) and the 2022 top of 151.94 (October 21. In case bears regain the upper hand, the initial support level is set at March's low of 146.47 (March 8), which is reinforced by the proximity of the key 200-day SMA (146.68). If the pair clears the latter, it could extend the drop to the February low of 145.89 (February 1) seconded by the December 2023 low of 140.24 (December 28).
The Japanese Yen (JPY) weakened further last week despite the BoJ’s decision to finally tighten monetary policy. Economists at MUFG Bank analyze USD/JPY outlook.
From an FX perspective, it is difficult to argue that BoJ action alone both last week and going forward will be enough to change the JPY direction. But when global yields do start to move lower, the stance of the BoJ will certainly reinforce the scale of yen appreciation.
We still see scope for USD/JPY to drop to at least 140.00 by year-end with risks of a move to the mid-130.00’s. We also expect intervention quite quickly after any break of 152.00 with the government clearly opposed to Yen depreciation that would only serve to reinforce voter dissatisfaction with the Kishida government.
The initial FX market reaction to the news that the BoJ had exited its negative interest rate policy after eight years was one of disappointment. Economists at Rabobank analyze USD/JPY outlook for the coming months.
The BoJ has exited its negative interest rate policy after eight years. The JPY sold off on a ‘sell on the fact ‘reaction as investors digested the news that BoJ Governor Ueda was not in a position to signal that this week’s policy move was the start of a series of increases in interest rates.
Developments regarding the BoJ’s virtuous cycle are only part of a series of changes and reforms that will dictate how attractive Japanese assets become over the medium term.
We see scope for the JPY to recover moderately in the months ahead and maintain a 12-month target of USD/JPY at 140.00.
USD/JPY has moved back to within touching distance of the highs from the last couple of years at just below the 152.00 level. Economists at MUFG Bank analyze the pair’s outlook.
Japanese officials find themselves under pressure to support the Yen again after market participants scaled Fed rate cut expectations at the start of this year in response to stronger US inflation data. Last week’s reassurance from the Fed that they still plan to deliver three rate cuts this year has not been sufficient on its own to prevent the US Dollar from strengthening further last week.
However, we do expect verbal intervention from Japanese officials to help dampen further upside for USD/JPY in the near term. Japan’s top currency official Masato Kanda warned that ‘the current weakening of the yen is not in line with fundamentals and is clearly driven by speculation. We will take appropriate action against excessive fluctuations, without ruling out any options’. He also added that ‘we are always prepared’ when asked about the prospect of direct intervention. He noted that the ‘large fluctuation of 4% in just two weeks in USD/JPY’ does not reflect fundamentals that he finds ‘unusual’.
USD/JPY is trading down almost a tenth of a percent in the 151.300s at the start of the new week. It has lost ground after intervention talk from Japan’s currency chief heightens speculation the Japanese authorities are about to use market operations to prop up their currency.
Vice-finance minister for international affairs Masato Kanda, was responding to the weakness experienced by the Yen, which remains at historic lows, after the Bank of Japan’s (BoJ) historic decision to raise interest rates for the first time since 2007 at their policy meeting last Tuesday. The move seemed highly unexpected since higher interest rates are usually a factor that strengthens not weakens currencies.
"The current weakening of the Yen is not in line with fundamentals and is clearly driven by speculation,” Kanda told reporters Monday. "We will take appropriate action against excessive fluctuations, without ruling out any options,” he said, according to a report in the Japan Times.
When questioned about the possibility of the authorities engaging in direct intervention, or Yen-buying in the open market Kanda said, “We are always prepared.”
USD/JPY has reached a level, above 150.000, where historically the BoJ has been known to intervene to prop it up, as was the case in 2022 when the currency hit 151.950 against the US Dollar.
Data from the currency futures market seems to support Kanda’s view that speculators drove the move higher following the BoJ decision. During the week of the BoJ’s March meeting, speculators, such as hedge funds, actually increased their bearish (short) bets on the Yen, according to data from the Commodity Futures Trading Commision (CFTC), despite widespread rumors the BoJ was going to hike rates.
From a technical perspective the USD/JPY has formed a bearish Hanging Man Japanese candlestick pattern (circled) on Thursday, suggesting a heightened risk of a short-term reversal and pullback.
US Dollar versus Japanese Yen: Daily chart
The combination of the fact that the pair has tested the level of the 2023 and 2022 intervention highs, and at the same time formed the bearish pattern increases the possibility of a decline following on.
Friday’s red candlestick adds confirmation to the Hanging Man from Thursday, and further increases the odds of more downside.
Japanese candlesticks are only short-term reversal patterns, however, so the move lower may be short-lived.
A continuation of the pullback might be expected to go as low as support at the 50-day Simple Moving Average (SMA) situated at 149.123.
Alternatively, a recovery and clear break above 152.000 would suggest bulls continue to have the upper hand and the BoJ is reluctant or unable to intervene sufficiently to move the exchange rate.
Such a move, however, would be unlikely to rise much higher given the forces pitched against it, with a possible target at the next whole number of 153.000.
USD/JPY continues its decline, nearing 151.20 during the Asian session on Monday. This movement follows the release of the Bank of Japan (BoJ) Minutes from the January policy meeting. BoJ Board members acknowledged an increasing likelihood of reaching the central bank's inflation target, albeit gradually.
Furthermore, members discussed the possibility of measures if a positive cycle of wages and inflation is confirmed. Some policymakers noted that the risk of inflation significantly exceeding expectations has diminished.
Moreover, the Japanese Yen (JPY) may receive support from potential forex intervention. Japan's top currency diplomat, Masato Kanda, issued a warning, stating his intention to take appropriate action to address excessive JPY weakness, without ruling out any measures.
The US Dollar Index (DXY) weakens despite higher US Treasury yields. However, the US Dollar (USD) saw a sharp rise following hawkish remarks from Federal Reserve Bank of Atlanta President Raphael Bostic on Friday. Bostic revised his earlier forecast of two interest rate cuts this year, now expecting only one, citing persistent inflation and stronger-than-expected economic data.
Nonetheless, the USD may encounter downward pressure on expectations for the initiation of a Federal Reserve easing cycle, anticipated to start in June. Despite higher inflation readings, the Federal Reserve has downplayed concerns, with Chairman Jerome Powell assuring markets that the central bank will not hastily react to two consecutive months of increased inflation figures.
USD/JPY has formed a bearish Hanging Man Japanese candlestick pattern (circled) at key chart highs in the 151.000s on Friday, suggesting a heightened risk of a short-term reversal and pullback.
US Dollar versus Japanese Yen: Daily chart
The combination of the fact that the pair has tested the level of the 2023 high and formed the bearish pattern increases the possibility of a decline following on.
If Friday ends as a bearish red candlestick this will add confirmation to the Hanging Man formed on Thursday, and further increase the odds of more downside.
Japanese candlesticks are only short-term reversal patterns, however, so the move lower may be short-lived.
The fact that the 151.000s represents a zone in which the Bank of Japan (BoJ) has been known to intervene to strengthen the Yen in the past, further increases the chances of imminent weakness for the pair.
A pullback might be expected to go as low as support at the 50-day Simple Moving Average (SMA) situated at 149.009.
Alternatively, a recovery and clear break above 152.000 would suggest bulls continue to have the upper hand and the BoJ is reluctant or unable to intervene sufficiently to move the exchange rate.
Such a move, however, would be unlikely to rise much higher given the forces pitched against it, with a possible target at the next whole number of 153.000.
The USD/JPY pair slips to 151.00 in Friday’s late European session. The Japanese Yen has been underpinned against the US Dollar as Japan’s hot February inflation data improved investors' confidence in the Bank of Japan’s (BoJ) decision to pivot to policy normalization. The asset faces pressure despite the buoyant US Dollar amid a significant improvement in the United States economic outlook.
The Statistics Bureau of Japan reported that Japan’s annual National headline Consumer Price Index (CPI) grew at a stronger pace of 2.8% compared to the prior release of 2.2%. BoJ’s preferred inflation measure that excludes fresh food rose by 2.8%, as expected, compared to the former reading of 2.2%. Price pressures remaining consistently above the 2% target will allow the BoJ to maintain interest rates positive despite maintaining an accommodative stance.
Also, increasing speculation about Japan’s government intervening in the FX domain provides support to the Japanese Yen. Japan's Finance Minister Shunichi Suzuki said that currencies must move in a stable manner and that he is closely watching foreign exchange moves with a high sense of urgency.
Meanwhile, the US Dollar Index (DXY) refreshes its monthly high at 104.44 as investors hope that rate cuts by the Federal Reserve (Fed) won’t be so aggressive due to the upbeat US economic outlook. The outlook for the US economy improved after the Federal Reserve (Fed) upwardly revised growth forecasts for 2024. The Fed sees the US Gross Domestic Product (GDP) growing by 2.1%, up from the 1.4% it projected in December.
USD/JPY is consolidating around 151.60 and struggling to break above its November 2023 high of 151.91. Economists at BBH analyze the pair’s outlook.
The threat of FX intervention is offering JPY support. Japan’s Finance Minister Shunichi Suzuki warned again he’s ‘watching forex moves with a high sense of urgency’.
Japan’s February CPI print suggests the bar for an aggressive BoJ tightening cycle remains high. Bottom line: we think it’s only a matter of time before USD/JPY makes new cyclical highs.
The USD/JPY pair finds support after correcting to near 150.27 in the European session on Thursday. The asset rebounds as the US Dollar recovers after refreshing a five-day low. The US Dollar Index (DXY) bounces back from 103.17 as the Federal Reserve’s (Fed) latest economic projections showed that the United States growth rate for 2024 was revised higher to 2.1% from 1.4% forecasted in December’s policy meeting.
There is a region-specific demand in the global markets. Risk-sensitive assets in Europe are facing pressure as the Swiss Nation Bank (SNB) surprisingly reduced interest rates by 25 basis points (bps) to 1.25% while demand for antipodeans and Asian currencies is upbeat. S&P 500 futures have posted significant gains in the London session.
The market sentiment is broadly upbeat as the Fed’s dot plot for the March meeting, released on Wednesday, indicated that three rate cut projections for this year remain alive. In the monetary policy statement, Fed Chair Jerome Powell said that he is confident in the story of easing underlying price pressures despite recent hot inflation readings.
This has led to a sharp increase in speculation that the Fed will begin rate cuts from the June policy meeting. The CME FedWatch tool shows that there is a 74% chance that a rate cut will be announced in June.
Meanwhile, the Japanese Yen rose against the US Dollar after speculation of stealth intervention in the FX domain escalated. Japan's Finance Minister Shunichi Suzuki said, "Currencies must move in a stable manner and that he is closely watching foreign exchange moves with a high sense of urgency."
However, the Japanese Yen struggles to hold strength as the near-term guidance for the monetary policy by the Bank of Japan (BoJ) is still accommodative despite exiting the expansionary policy stance.
USD/JPY took a quick dive into 151.25 after the Federal Reserve (Fed) held its main reference rate at 5.5% as markets had broadly predicted. Risk-hungry investors are shrugging off higher-than-previous growth expectations and interest rate forecasts from the Federal Open Market Committee (FOMC). According to the FOMC, US Gross Domestic Product (GDP) growth through 2024 is going to be slightly higher than forecast, and year-end interest rates are likely to be higher than previously expected.
Despite upside shifts to the Dot Plot, the Fed still expects three rate cuts through 2024 for around 75 basis points, and markets are keeping hopes of near-term rate trimming to begin closer to the middle of the year. Fed Chairman Jerome Powell is due at the bottom of the hour at 18:30 GMT.
Read more: Fed leaves interest rate unchanged at 5.25%-5.5% as forecast
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