The USD/JPY pair closed last week around its gains, stabilizing around the 150.70 resistance level at the time of writing. As we mentioned, the overall trend of the currency pair will remain bullish as long as it is above the psychological resistance of 150.00. Currently, investors are awaiting the announcement of the US inflation reading preferred by the US Federal Reserve and the US GDP growth reading later this week to determine the fate.
On the other hand, the easing of financial pressures around the world has boosted the attractiveness of yen-funded carry trades, which has increased the risk of a decline in the value of the currency, which could increase the chances of intervention by the Japanese authorities. Moreover, the Bank of America's Global Financial Stress Index fell to its lowest level in four years last week, indicating an increased appetite for high-yielding and riskier assets. The Japanese yen, the currency of the only remaining economy in the world with negative interest rates, fell for the eighth consecutive week against the dollar on Friday. That was the longest losing streak since October 2022.
Overall, expectations that the Bank of Japan will tighten policy more slowly than traders previously expected are limiting the scope of the country's currency recovery, especially against the US dollar, as US yields are among the highest in the G10 markets. Recently, the data from major economies has been surprisingly upbeat in recent weeks, prompting policymakers in the US and Europe to caution against becoming too confident that rate cuts are imminent.
According to analysts, bets on increased yen-funded deals are likely to rise amid the euphoria in global markets. Even if the Bank of Japan raises interest rates slightly, the real interest rate will remain negative for a longer period of time."
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Currently, the Bank of Japan's short-term interest rate is about two percentage points below Japan's core inflation rate. Already, the currency has weakened beyond the levels that saw the Japanese Ministry of Finance enter the market in September 2022. Analysts in Tokyo expect the authorities to remain on high alert if the yen falls to around 152 yen per dollar. According to analysts, markets can expect an increase in verbal warnings about speculative yen moves. Consequently, USD/JPY could take its cues from the US bond market, which could push the pair beyond last year's high.
Speculators are betting on a further decline in the Japanese currency. Net short yen positions held by leveraged funds and asset managers combined rose to their highest level since mid-2022 last week, according to data from the Commodity Futures Trading Commission.
USD/JPY Technical analysis and Expectations Today:
According to the performance on the daily chart below, the price of the US dollar against the Japanese yen “USD/JPY” is still rising and will remain so as long as it remains stable above the psychological resistance of 150.00. technically, the trend will remain upward as long as the discrepancy continues between the US central bank’s strict policy and the Bank of Japan, which has negative interest rates, in addition to Economic performance between the United States and Japan. The positive results of the important American economic data this week may give bulls the momentum for a stronger upward move. The next most important resistance levels will be 150.85, 151.30, and 152.00, respectively. From the last level, the technical indicators will move towards strong saturation levels of buying, and talk will increase of imminent Japanese intervention in the markets to prevent further currency collapse. So far, we still prefer to buy the dollar against the Japanese yen from every falling level.
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