- In a record-breaking upward trend, the USD/JPY surged to around the 154.85-yen resistance, hitting a 34-year low and prompting a senior official to issue fresh warnings about excessive currency movements.
- Japanese Finance Minister Shunichi Suzuki said that the trilateral meeting held last week between the US, Japan and South Korea laid the groundwork for Tokyo to address sharp currency fluctuations, his strongest warning yet of potential coordinated intervention.
In general, investors will now focus on the Bank of Japan's policy decision this week, as it is expected to maintain the current monetary settings. Meanwhile, Bank of Japan Governor Kazuo Ueda said at the G20 summit last week that the Japanese central bank may raise interest rates again if a weak yen leads to sustained price increases through higher import costs. He added that the Bank of Japan will show in its forecasts for quarterly growth and prices scheduled for the next policy meeting how the decline in the value of the yen has affected the economy.
According to forex trading platforms, the yen is hovering around its 34-year low and trading near the psychologically important 155 level, which markets fear could prompt government authorities to intervene in currency markets. Currently, there is increasing speculation that Japan could coordinate with the US and South Korea to support the yen after the US acknowledged serious concerns about currency movements at their trilateral meeting last week.
On the other hand, according to stock trading platforms, the Nikkei 225 Japanese index rose 0.3% to close at 37552. Also, the broader TOPIX index added 0.14% to 2666, as Japanese stocks rose for the second consecutive session, tracking a tech-led rally overnight in Wall Street markets amid easing concerns about the broader Middle East.
In Japan, investors digested data that showed manufacturing activity was close to flat in April, while services activity grew by the most in 11 months. Now, Investors are looking forward to the Bank of Japan's monetary policy decision later this week. Moreover, the Bank of Japan is under pressure to raise interest rates again due to persistent inflation and a weak yen, but the central bank has indicated that it will maintain accommodative monetary settings for some time.
Ultimately, notable gains were seen from heavyweight index stocks such as Mitsubishi UFJ (0.6%), Fast Retailing (1.8%), Sumitomo Mitsui (1%), Shin-Etsu Chemical (1.5%) and Keyence (1%).
USD/JPY Technical analysis and Expectations Today:
The overall trend for USD/JPY is still bullish, and its recent gains have been strong enough to push technical indicators towards strong overbought levels. Therefore, profit-taking is expected at any time, especially if Japan intervenes in currency markets to prevent the collapse of the yen. So far, according to the free live trading recommendations page, I still prefer to sell USD/JPY from its current highs and above without risk, as Japanese intervention in the markets could occur at any moment, and therefore could bring strong and sharp selling to the pair, changing the direction in the short and medium term to bearish.
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