USD/JPY on Intervention Watch as it Hits 34 Year Highs

  • USDJPY
    (${instrument.percentChange}%)

USD/JPY Analysis

In a watershed decision last week, the Bank of Japan ended nearly a decade of ultra-loose monetary stance, which has been detrimental for the Yen, abandoning negative interest rates and the yield curve control (YCC). However, this pivot did not constitute a hawkish turnaround, since policymakers will continue bond purchases and maintain an accommodative stance.

On the other side of the Pacific Ocean, the Fed stayed on the sidelines again this week and maintained its view for three rate cuts this year [1]. This dovish outcome led to only short-lived pressure to USD/JPY, as the officials have adopted a conservative approach towards lower rates, due to recent inflation stickiness, strong economy and relatively tight labor market.

USD/JPY extends this year's rise as result, hitting today new thirty-four year highs and trying to take out the July 1990 peak. This brings the 155.75 level in the spotlight, but we are not convinced it can tackle it in the near-term.

TradingView Pro

As an FXCM account holder you could get TradingView Pro FREE for 1 year saving over $100.

On the other hand, policy dynamics are shifting despite the slow transition, which could eventually led to a substantial repricing in the pair. In spite of the Fed's cautious stance, it still points to multiple rate cuts this year. Its Japanese counterpart is unlikely to implement aggressive tightening, but it is reasonable to expect at least one more hike this year. Furthermore, the continued devaluation of the Yen, raises chance of FX intervention by Japanese authorities. Their last action was in October of 2023 at similar levels. The country's Finance Minister warned today of potential decisive action, according to Reuters. [2]

As such, we can see a pullback towards the EMA200 (149.50) and daily closes below it would pause the bullish bias. Deeper correction has a higher degree of difficulty at this stage though, as the downside contains multiple roadblocks.

Nikos Tzabouras

Senior Financial Editorial Writer

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.

References

1

Retrieved 27 Mar 2024 https://www.federalreserve.gov/monetarypolicy/fomcpresconf20240320.htm

2

Retrieved 12 May 2024 https://www.reuters.com/markets/currencies/japan-finmin-suzuki-take-decisive-steps-vs-excessive-yen-moves-2024-03-27/

${getInstrumentData.name} / ${getInstrumentData.ticker} /

Exchange: ${getInstrumentData.exchange}

${getInstrumentData.bid} ${getInstrumentData.divCcy} ${getInstrumentData.priceChange} (${getInstrumentData.percentChange}%) ${getInstrumentData.priceChange} (${getInstrumentData.percentChange}%)

${getInstrumentData.oneYearLow} 52/wk Range ${getInstrumentData.oneYearHigh}
Disclosure

Any opinions, news, research, analyses, prices, other information, or links to third-party sites contained on this website are provided on an "as-is" basis, as general market commentary and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is therefore not subject to any prohibition on dealing ahead of dissemination. Although this commentary is not produced by an independent source, FXCM takes all sufficient steps to eliminate or prevent any conflicts of interests arising out of the production and dissemination of this communication. The employees of FXCM commit to acting in the clients' best interests and represent their views without misleading, deceiving, or otherwise impairing the clients' ability to make informed investment decisions. For more information about the FXCM's internal organizational and administrative arrangements for the prevention of conflicts, please refer to the Firms' Managing Conflicts Policy. Please ensure that you read and understand our Full Disclaimer and Liability provision concerning the foregoing Information, which can be accessed here.

Past Performance: Past Performance is not an indicator of future results.

Spreads Widget: When static spreads are displayed, the figures reflect a time-stamped snapshot as of when the market closes. Spreads are variable and are subject to delay. Single Share prices are subject to a 15 minute delay. The spread figures are for informational purposes only. FXCM is not liable for errors, omissions or delays, or for actions relying on this information.