- As the week commenced, the price of the USD/JPY currency pair surged to the resistance level of 151.77, with the yen nearing its lowest point in 34 years.
- Around the key resistance level of 152.00, traders perceive an increased risk of intervention by Japanese officials in the market, bolstered by strong US factory data which strengthened the dollar.
- Yesterday, the yen declined against the dollar following unexpected growth data in US factory activity, reinforcing bets that the Federal Reserve would take its time in lowering interest rates.
- This moves places the yen, which touched its weakest level in 34 years last week, at around 151.65 to the dollar.
Overall, traders are on high alert after Japanese Finance Minister Shunichi Suzuki stated that authorities are closely monitoring the yen with a sense of urgency and are prepared to take appropriate actions against any excessive movements. Commenting on the performance of the USD/JPY currency pair, Brad Bechtel, a forex analyst at Jefferies, said, "Authorities appear tense about the 152 level - which, on long-term charts, is a good resistance level." "I don't think they would respond if the yen slowly moved through 152. But a sharp, large move through 152 to 154 or 155 might see a response."
Japanese officials have stated that they are prepared to act in the forex market, if necessary, to halt the decline of the Japanese yen. The currency has lost about 7% against the US dollar so far in 2024, marking the worst performance among its peers in the G10 over the past year. Even after the Bank of Japan ended its recent negative interest rate policy, investors continue to focus on the interest rate gap between Japan and the United States.
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In general, our model shows that expectations for the Japanese yen are well-balanced, but the risks lean towards appreciation - indicating that this could be a rare opportunity for intervention to succeed. On another note, bond traders reduced the size of expected monetary policy easing in the United States this year on Monday after the ISM manufacturing for March exceeded all estimates in a Bloomberg survey of economists. Obviously, this provided support for both the US dollar and US Treasury bond yields, while increasing pressure on the Japanese yen and other G10 currencies.
Investors are now looking ahead to US data on Tuesday, which economists expect to show continued declines in US job openings in February. Also, US non-farm payrolls data due on Friday and inflation figures next week will also help guide trader expectations.
USD/JPY Technical Analysis and Expectations Today:
There is no change in my technical view of the performance of the price of the US dollar against the Japanese yen (USD/JPY), as the general trend is still bullish. It may remain so if the discrepancy is clear between the policy of the Central Bank of Japan and the US Federal Reserve, as well as economic performance. However, it must be considered that the upcoming gains of the USD/JPY pair will lead to a lot of talk about an imminent Japanese intervention in the markets to prevent further collapse. Therefore, it is better to think about selling without risk from the 152.00 resistance and above it. Ultimately, the general bullish trend of the USD/JPY pair will remain in place until the reaction to the announcement of US job numbers at the end of the week.
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