At 8:30 am (JST), the Japanese yen exhibited signs of recovery, climbing to 151.5 against the US dollar after a period of sluggish performance in the forex market.
The persistent weakness of the yen prompted renewed statements from Finance Minister Shunichi Suzuki, signaling the government’s vigilance regarding currency intervention. Suzuki emphasized the authorities’ readiness to address any excessive declines in the yen, attributing recent movements to “speculative” actions in the market.
Speaking on March 29, Suzuki reiterated the government’s commitment to closely monitoring the yen’s fluctuations, stressing the importance of adhering to fundamental principles to avoid excessive volatility. He assured that prudent measures would be taken, but refrained from reiterating earlier threats of “decisive steps” to manage the yen’s decline.
While the Bank of Japan maintains a policy rate near zero and considers rolling back stimulus measures, the disparity in interest rates between the US and Japan is expected to persist. Historically, a weak yen has been beneficial for Japan’s major manufacturers, driving foreign investment and bolstering the Nikkei share average, which surged to 12,328 points in the fiscal year, reaching its highest level since March 2021.
Despite the positive impact on domestic stocks, investors remain cautious amid concerns of potential currency market interventions. The decline of the yen poses challenges for consumption and retail profits, exacerbated by elevated raw material costs.
As global forex dynamics continue to evolve, Japanese authorities remain vigilant, emphasizing the importance of stability and adherence to fundamental principles in currency movements.
Technical Analysis:
The USDJPY pair remained relatively stable, hovering around the 151.50 mark. Notable economic indicators emerged from Tokyo, where the Consumer Price Index (CPI) for March exhibited a 2.6% increase compared to the previous year, slightly up from February’s 2.5% rise. Meanwhile, the Core Tokyo CPI, excluding volatile food and energy prices, recorded a 2.9% year-over-year growth, marking a slight decline from the 3.1% uptick observed in February.
A closer analysis on the daily chart reveals a consolidation pattern just below a significant resistance level situated at 151.92. The pair appears to have formed a large ascending triangle, suggesting a potential bullish breakout if the resistance is breached. Traders anticipate selling pressure near this level, with predetermined risk levels set above the resistance to capitalize on a potential downward move towards the lower trendline of the triangle. Conversely, buyers are eyeing a decisive breach of the resistance to strengthen bullish positions and target new highs.
Examining the 4-hour chart, it’s evident that the price has been oscillating within a range delimited by the 151.00 support and the 151.92 resistance. This sideways movement is attributed to the absence of significant economic data and concerns over potential intervention, which have capped further upward momentum. However, anticipation builds for the upcoming week as a flurry of essential US economic data is expected, with positive surprises likely prompting a breakout above resistance. Conversely, disappointing US data could trigger a sell-off, potentially breaching the 150.00 handle and intensifying bearish sentiment.
Zooming in on the 1-hour chart provides a closer look at recent price action, which has been characterized by minimal fluctuations throughout the week. Traders may continue to employ a range-bound strategy, buying at support levels and selling at resistance until a breakout occurs.
Overall, the daily chart depicts a consolidation phase around the 151.5/151.7 range, with the USD/JPY pair struggling to establish a clear direction amidst threats of intervention by Japanese authorities. However, a decisive breach above 152.00 could pave the way for a challenge towards the 153.00 level. Conversely, failure to sustain prices above 152.00 and 151.00 may signal a bearish reversal, with initial support levels identified at 150.49 and 149.86, respectively. Traders remain vigilant for any shifts in market sentiment and decisive price movements in the near term.
Sources:
BDSwiss Webtrader USD/JPY Daily Chart
https://in.marketscreener.com/news/latest/Japan-flags-speculative-yen-moves-signals-ch ance-of-intervention-46317038/
https://www.straitstimes.com/business/japan-flags-speculative-yen-moves-signals-chanc e-of-intervention
