- As the shortened trading week begins, USD/JPY has stabilized around and above the psychological resistance of 150.00, which supports the bullish trend.
- Technically, the general trend remains as such until a reaction to the announcement of the content of the minutes of the last meeting of the US Federal Reserve Bank.
- In general, the divergence between the Fed's hawkish policy and the Bank of Japan's negative interest rate, as well as economic performance, ultimately favours the strength of the US dollar.
On another level, Japanese stocks' rally toward record highs comes as asset managers increase their bearish positions on the Japanese yen to the most in more than a year, suggesting investors remain cautious about currency risks. Moreover, the correlation coefficient between yen positions and the TOPIX 100 index was negative 0.56 as of February 13, the highest level since 2020, based on a Bloomberg analysis of data released by the Commodity Futures Trading Commission.
Obviously, this suggests that the currency position among asset managers tends to shift in a downward direction when the country's large-cap stocks rise. Recently, the Japanese currency has declined by 6% against the US dollar so far this year, which is contrary to expectations that indicate that it is expected to rebound in 2024. The decline in the value of the Japanese yen leads to the erosion of the returns of Japanese stocks rising in the US currency for global investors, who may transfer their money. Shortly, away from stagnant Chinese stocks and into the Japanese market.
The Japanese yen was weak amid increasing expectations that even if the Bank of Japan were to raise interest rates for the first time since 2007 in the coming months, it would not hasten to raise interest rates further. Also, the three-month hedging costs against the depreciation of the Japanese yen are minus 5.6%, indicating that investors taking bearish bets on the currency can profit as long as the yen does not rise significantly.
According to stock trading platforms, the TOPIX 100 index rose by 14% this year, in addition to last year’s rise of 27%, which was the largest since 2013. Historically, the index reached its highest level since 1990, partly due to optimism that deflation in Japan is approaching. From its end, with a senior official in the Japanese Cabinet Office saying that the nation has reached the last corner before declaring victory over low consumer prices.
The 52-week moving average of global investors' net buying of Japanese stocks and index futures rose to 8.1 trillion yen (54 billion US dollars) in mid-January, the largest data on the stock exchange dating back to 2015. Despite the slowdown in purchases to 5.8 trillion yen in the week ending February 9, this is still significantly stronger than the average sales of 2.4 trillion yen since 2015.
USD/JPY Technical Analysis and Expectations Today:
The price of the US dollar against the Japanese yen (USD/JPY) may remain in the vicinity of an upward rebound path with gains around the psychological resistance of 150.00, which supports the bulls. Thus, if the tone of the minutes of the last meeting of the US Federal Reserve Bank is hawkish, the US dollar may find the opportunity to move strongly upward, and the next resistance levels will be traded at 150.85, 151.20 and 152.00 respectively. On the other hand, during the same period on the daily chart, the move towards the support level 148.80 will be important to break the trend. Finally, we still prefer to buy USD/JPY from every falling level.
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