- The USD/JPY exchange rate declined amid a broader weakening of the US dollar and increased talk of intervention in the forex market by Japanese authorities.
- Selling reached a support level of 151.44 on Friday before a bullish gap opened at the beginning of trading this week following the results of the Japanese elections, and as a result, the USD/JPY pair jumped to the resistance level of 153.88, the highest for the pair in more than three months.
Recently, verbal intervention by Japanese policymakers has helped provide temporary support for the Japanese yen. According to the forex market trading… The USD/JPY pair peaked at 153.18 in the middle of last week, but has since settled at a lower level of 151.98. The pair is still about 9% higher than its September lows, and the authorities appear to be increasingly concerned about the sudden decline in the value of the yen. In this regard, Atsushi Mimura, Japan’s top currency diplomat, said: “The recent moves in forex rates were discussed in a bilateral meeting between Finance Minister Kato and US Treasury Secretary Yellen.”
He added that Yellen and Kato confirmed that they would continue to communicate closely.
According to Hardman of MUFG Bank, the comments send a clear warning signal to market participants that Japan is ready to intervene again to support the yen if it continues to weaken as it has so far this month. However, MUFG believes that intervention is unlikely until after the US elections. He explains that the elections are considered a pivotal event for the performance of USD/JPY and the US dollar more broadly.
The analyst added, “While a Trump victory and a red wave could drive USD/JPY back towards its historical highs, a divided Congress with either Trump or Harris as president could see USD/JPY give up some of its recent strong gains by limiting the scope of fiscal policy easing and helping to ease upward pressure on US yields.”
USD/JPY Technical Analysis and Expectations Today:
USD/JPY has now advanced to trade a few levels above the 100-hour moving average. As a result, the currency pair is approaching overbought levels on the 14-hour Relative Strength Index (RSI). In the near term, based on the hourly chart, USD/JPY is trading within a sideways channel formation. However, the 14-hour RSI has recently rebounded to approach overbought levels. Therefore, bulls will look to extend the current bounce towards 153.75 or higher to the 154.00 resistance while bears. On the other hand, will look to pounce on gains around 152.46 or lower at 151.55.
In the long term, based on the daily chart, USD/JPY is trading within an ascending channel formation. Also, the 14-day RSI seems to support a longer-term bullish bias as it approaches overbought levels. Therefore, bulls will look to ride the current rally towards 155.03 or higher to the 158.04 resistance. On the other hand, bears will look to pounce on pullbacks around 149.40 or lower at the 145.90 support.
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