- An extension of the gains of the USD/JPY at the end of last week's trading, the currency pair also moved upward at the beginning of this week's trading, with gains that reached the resistance level at 142.68, its highest in three weeks.
- It settled around the level of 142.15 at the time of writing the analysis. This performance is primarily amid the collapse of the Japanese yen against the rest of the currencies after the Bank of Japan announced on Friday.
- All in all, the Japanese Yen (JPY) is still the most volatile major currency in 2023, and after 2022, when all JPY pairs are up. The break-up in the JPY crosses was so violent last year that the Bank of Japan had to intervene twice in the markets to stop further currency collapse.
However, interventions in the forex market are rarely successful. They certainly work in the sense that they buy time for the central bank to adjust its monetary policy. The two interventions in 2022 did just that as they saved a lot of time.
First, the Bank of Japan sold the US dollar and bought the Japanese yen when USD/JPY traded around the 146 resistance. This move impressed the markets for about a day or two. The rally continued, and when the USD/JPY exchange rate crossed the 151 resistance barrier, the Bank of Japan intervened again. This time with more force and with more conviction.
As a result, the USD/JPY exchange rate fell abruptly, all the way to the 130 level. This is a huge move in the forex market, and the 130 level proved to be just an opportunity for buyers to bet once again that the Japanese yen will continue to weaken.
However, the two interventions in 2022 bought time for the Bank of Japan to adjust its policy. The bank did not raise interest rates, but announced last Friday that it was adjusting its yield curve control program by allowing yields to rise above the previous cap. This announcement sparked a sharp downward movement in the JPY crosses. At one point, USD/JPY was trading at 138 after it was 142 before the announcement.
It is understood that the Bank of Japan's adjustment of the yield curve control program should not derail the JPY's outlook - which remains bearish. The Japanese yen returned to the levels it was before the Bank of Japan's adjustment of the yield curve control program. It took the yen less than 24 trading hours to return to where it was before the Bank of Japan's monetary policy announcement. All JPY crosses are trading above pre-announcement levels, and the bias remains bullish given that this is the last trading day of the month when shorting is not unusual.
USD/JPY Technical Outlook
According to the performance on the daily chart below, the general trend of the USD/JPY is still bullish. Stability is above the psychological resistance at 140.00, which still supports the bulls to have more control over their performance. The continuation of the yen's decline will give the bulls more momentum to move toward the resistance levels at 143.30 and 145.00, respectively. On the other hand, and for the same period of time, the currency pair will not abandon the upward path without returning to the support level of 138.70 again.
I expect the currency pair to remain on its bullish path until the markets and investors react to the announcement of the US job numbers.
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