USD/JPY Analysis: Yen Selling Pressure Renewed

Yen faces renewed selling pressure, USD/JPY approaches 150.00. Bank of Japan's policy and IMF recommendations weigh in, with technical analysis suggesting a continued bullish trajectory for the pair.

  • Bulls' control over the direction of the currency pair US Dollar against the Japanese Yen (USD/JPY) increased last week after statements by Bank of Japan officials about the future of abandoning the negative interest policy.
  • Accordingly, the price of the currency pair rebounded towards the resistance level of 149.57, the closest point to the psychological resistance level of 150.00, and closed the quiet week's trading stable.
  • Around the level of 149.25, the price of the Japanese yen was affected by recent statements by Japanese Central Bank officials, as Governor Kazuo Ueda said that financial conditions in Japan will remain easy at the present time, even after the Bank of Japan puts an end to the last negative interest rate system in the world.
  • Based on the bank’s economic forecasts, Ueda said in response to questions in parliament last Friday, “Even if we end negative interest rates, accommodative financial conditions are likely to continue”.

USD/JPY Analysis Today - 12/02: Yen Selling Pressure Renewed (Graph)

Ueda's comments were the latest by bank officials to assure market participants that any end to the negative rate would not herald a change in the bank's fundamental policy stance. Moreover, deputy Governor of the Bank of Japan, Shinichi Uchida, said before that it is difficult to imagine the bank raising interest rates continuously and quickly, even after the end of the sub-zero interest rate regime. 

By emphasizing monetary policy continuity, officials have reinforced prevailing views that Japan's first interest rate hike since 2007 is approaching. Also, Ueda reiterated his view that once a stable inflation target emerges, the bank will consider whether to end stimulus measures including sub-zero borrowing costs. 

For its part, the International Monetary Fund indicated its support for the cautious approach followed by the Bank of Japan by recommending in an article IV advisory report on Friday that the bank take a gradual pace to raise interest rates once it is confirmed that inflation will continue. In this regard, Gita Gopinath, First Deputy Director General of the International Monetary Fund, told reporters in Tokyo: “There are negative risks to inflation and the data are mixed.” “It is very important that the Bank of Japan does what it does, which is to move cautiously and maintain very accommodative monetary policies.” 

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According to Forex currency trading platforms, the price of the yen fell after Uchida's statements, which traders considered pessimistic, before falling slightly more to touch 149.49 to the dollar, the lowest level since November, after Ueda spoke on Friday. Therefore, if the yen weakens beyond the key 150-yen psychological resistance threshold, market speculation about an early change in price strength may gain. The authorities are keen to avoid adding inflationary pressures to increase costs for families and small businesses. 

On the other hand, Japanese Finance Minister Shunichi Suzuki said earlier on Friday that he would continue to closely monitor foreign exchange (Forex) rates, adding that decisions regarding specific monetary policies should be left to the central bank. Recently, most observers expected the Bank of Japan to ditch negative interest rates in March or April. Finally, the bank will issue its next policy decision on March 19th. 

USD/JPY Technical Analysis and Expectations Today: 

The price of the USD/JPY pair has now advanced to trade at a few levels above the 100-hour moving average line. As a result, it appears that the currency pair is about to enter the overbought levels of the RSI on the 14-hour frame. In the near term, and according to the performance on the hourly chart, it appears that the USD/JPY pair is trading within an upward channel. Recently, the 14-hour RSI has advanced to trade near overbought levels. Therefore, the bulls will target potential channel breakout profits at around 149.89 or higher at the 150.23 resistance. On the other hand, the bears will look to pounce on pullbacks at around 149.11 or lower at the 148.70 support. 

In the long term, and according to the performance on the daily chart, USD/JPY appears to trade within an upward channel. The 14-day RSI also appears to be supporting a long-term bullish bias as it approaches overbought levels. Therefore, the bulls will look to ride the current series of gains towards 151.56 or higher to the 153.27 resistance. On the other hand, the bears will target long-term profits at around 147.48 or lower at the 145.64 support. 

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Mahmoud Abdallah
Mahmoud has been working fulltime in the Foreign Exchange markets for 12 years. Offers his analysis, articles and recommendations at the most renewed Arabic websites specialized in the global financial markets, and his experience gained a lot of interest among Arab traders. Works on providing technical analysis, market news, free signals and more with follow up for at least 12 hours a day, and aims to simplify forex trading and the concept of trading for his audience.