The USDJPY currency pair has experienced a whirlwind week, with the Japanese Yen (JPY) whipsawing against the US Dollar (USD) on suspected intervention by Japanese authorities and a widening interest rate differential between the US Federal Reserve and the Bank of Japan (BoJ). The yen has depreciated over 10% against the dollar this year due to the BoJ’s commitment to ultra-low interest rates, while the Fed is expected to maintain a hawkish stance at its upcoming meeting.
This week’s suspected intervention by Japanese authorities to weaken the yen’s decline has injected market uncertainty. While it halted the rapid depreciation, it’s unclear if Japan will continue intervening aggressively, especially against the backdrop of a strong dollar supported by high US yields.
The market remains focused on the Fed meeting’s outcome. Hawkish signals suggesting a delay in US rate cuts could further strengthen the dollar and pressure the yen. Conversely, dovish tones hinting at earlier rate cuts might weaken the dollar and provide temporary relief for the yen.
Technical Analysis
The 4-hour chart shows that USDJPY trades at 156.832, slightly higher following a recent decline. Price action trades slightly above the 20-SMA (green), 50-SMA (blue), and comfortably above the 100-SMA (orange). The 20-SMA and 50-SMA are positioned above the upward-sloping 100-SMA. The flat RSI (56.82) sits above the midline, indicating potential price stability.
Short-term trading opportunities may arise towards the 158.434 price level if the price action sustains a break above the SMAs. A break above the SMAs and the recent high of 158.434 could signal bullish momentum, potentially targeting the all-time high of 160.215. Conversely, a decline below the SMAs could present short-term selling opportunities towards the initial support at 155.266. A further break below this range might expose the 153.284 and 150.811 support levels.
Summary
Market sentiment leans towards short-term volatility in the USDJPY pair. The suspected intervention and the upcoming Fed meeting create uncertainty. A hawkish Fed could strengthen the dollar, while further intervention attempts by Japan could introduce temporary support for the yen.
Sources: TradingView, Trading Economics, Reuters, CNBC.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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