USD/JPY Bulls Still in Control Close to the 2022 Intervention Levels

  • USDJPY
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USD/JPY Analysis

The pair registered an advance of more than 9% in the first half of the year, closing in on the September 2022 high (145.90), which had prompted Japanese authorities to step in and buy Yen, following a series of verbal interventions. During the past several days, we have seen repeated comments by officials in support of the Japanese currency, which creates risk for new FX action.

USD/JPY lost steam last week and dropped on Friday as a result of the latest comments by Finance Minister Suzuki, as per Reuters [1], as well as soft inflation from the US. Headline PCE eased notably to 3.8% y/y in May, in the smallest increase in over a year. Those factors create scope for a pullback towards 142.50, but at this stage we struggle to see a correction that would challenge the EMA200 (140.70).

In spite of these news, bulls remain undoubtedly in control and managed to close last week with profits and start the new one with vigor. USD/JPY has the ability to reclaim 145.90, but we are cautious at this stage for further strength towards 148.83

As i had argued on Thursday's article "even if authorities step in, lasting impact is unlikely unless the BoJ changes its stance". The Japanese central bank maintains its ultra-loose policy setting, having shown no real inclination to change any time soon.

The US Fed on the other hand, has pointed to further tightening, with its latest projections implying an additional 50 basis points worth of hikes this year [2]. Even though headline PCE eased significantly, core remains sticky, moderating only marginally, to 4.6% y/y. More to it, tight labor market and GDP growth that continues to exceed estimates, support the higher-for-longer prospects.

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Markets now turn to this week's calendar, for the latest US Jobs report, that can determine the next leg of the pair.

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 03 Jul 2023 https://www.reuters.com/markets/currencies/japan-finance-minister-warns-against-excessive-yen-weakening-2023-06-30/

2

Retrieved 25 Jun 2024 https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20230614.pdf

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