USD/JPY Technical Analysis: Fears Over Currency Decline

The recovery of the Japanese yen from its lowest levels in several months against the US dollar did not last long after new threats to intervene in the forex currency market. It became clear that fears were growing about the currency’s decline. The currency pair the US dollar against the Japanese yen USD/JPY quickly returned to its strong upward path with long gains. At the time of writing the analysis, the resistance level 149.18 is the highest it has been in ten months and the closest to the psychological resistance 150.00, around which the possibility of Japan’s actual intervention in the markets often revolves.

For his part, Japanese Finance Minister Shunichi Suzuki said yesterday that he is “closely monitoring the movements of the currency market with a great sense of urgency.” Accordingly, the Japanese yen recovered its previous losses as investors withdrew their money from the table for fear of being on the wrong side of any intervention. Suzuki added that he “will not rule out taking any steps to respond to the unorganized movements in the forex currency market”.

Commenting on that, analyst Yu Na Bark Heger from Commerce Bank says: “If the value of the Japanese yen falls further, it is very likely that there will be more interventions.”

Earlier in the trading, the Japanese Yen continued its series of losses as the US Dollar reached its highest levels during the year at 149.15. The USD/JPY pair has since recovered to 148.9670. Meanwhile, GBP/JPY continues to struggle at 181.5190 amid continued pressure on the pound following last week’s decision by the Bank of England to keep interest rates unchanged.

Despite the recent developments, Kommersant Bank analysts do not see a fundamental change in the fortunes of the Japanese yen, as it will remain hampered by the low Japanese bond yield environment.

The US dollar is still in an offensive position, as it finds support from the rise in US bond yields, which are symptoms of the strong issuance by the US Treasury Department and the commitment of the Federal Reserve Bank to keep US interest rates high for an extended period. As a result, global bond yields move higher and paint a gloomy picture of the outlook for the global economy, thus benefiting safe havens such as the US dollar.

The safe-haven Japanese yen is expected to benefit, but the Bank of Japan’s strange position of keeping interest rates so low seems to be affecting the economy. The Bank of Japan gave no hint last Friday that it was ready to change its policy when it issued its policy decision in September, leading to further weakening of the yen. Meanwhile, Bank of Japan Governor Kazuo Ueda said this week that more patience is required.

Commerzbank says that if the Japanese yen depreciates further, it is very likely that there will be more interventions. The weakness of the US dollar would improve the situation of the Bank of Japan, but at the moment it seems that the market will bet on a stronger US dollar.

• There is no change in my technical point of view for the USD/JPY currency pair.
• The general trend is still up.
• It is expected to move towards the psychological resistance level of 150.00, from which it is best to sell the currency pair, as the Japanese intervention in the markets may come at any moment.
• There will be strong and sharp selling operations to take profits, not only in the dollar/yen, but in all currencies against the Japanese yen.

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