Price Analysis

USD/JPY Hits New 24-Year Peak Amidst Uncertain Policy Response

Briefly –

  • Finance ministry reaction to sharp Forex moves saw USD/JPY at a 24-year high.
  • Risk events include Jerome Powell’s U.S senate address and Japanese CPI inflation.
  • Here are crucial USD/JPY technical zones to watch.

Finance Ministry’s Reaction to Sharp Forex Moves Under Consideration

The statement that cleared the upside path for USD/JPY has the Japan Finance Minister, Suzuki, admitting the ministry was yet to decide on financing and timing sources for decisive comprehensive measure amidst price hikes.

Suzuki’s remarks add to multiple prior comments made on behalf of the finance ministry and the BOJ, disapproving of the yen’s sharp depreciation.

Before last week, the Bank of Japan Governor Kuroda seemed to favor the yen’s decline as it improved the firm’s returns for companies exiling foreign income.

Nevertheless, the Governor resorted to a U-turn last Monday, stating that the yen’s latest sharp plummets are pessimistic for Japan’s economy and thus undesirable.

The rebellious voices make it logical to presume that USD-JPY would meet resistance amidst its remarkable bull run, though that is yet to transpire. Today’s sessions saw the pair hitting a 24-year peak, surpassing the previous high of 135.60.

Nevertheless, investors should consider the warning from the Bank of Japan and Tokyo about yen weakness, especially as it seems that the bank would quit its ultra-dovish stance to increase rates.

Risks Events to Consider

Relatively lower inflation in Japan is among the factors that held BoJ’s hand. For instance, Japan’s April inflation figure stood at 2.5%, lower than United States’8.6% and United Kingdom’s 9%.

Inflation exceeding estimates on Friday would see the yen depreciating against the U.S dollar as BoJ might resort to its first interest rate hike.

Moreover, Fed Chair Jerome Powel will present his 2-times yearly report on financial policy to the U.S Senate on Wednesday & Thursday. Questions about last week’s aggressive 75bp rate hike will likely emerge and Fed’s move to a soft landing following prolonged accommodative financial policy periods.

USD/JPY Technical Levels

USD/JPY regained some losses last week, the week that witnessed the surprise 50bp hike by SNB, and Fed’s aggressive 75bp increase, with more impending depending on stats and confusion from the ECB concerning its bond market anti-fragmentation tool.

Nevertheless, massive rejection at 131.35 saw another USD-JPY jump, climbing beyond previous zones without a hassle. Today’s sessions saw the pair trading beyond last week’s peak at 135.60, swiftly nearing 136 flat.

The closest resistance stands near the October 1998 mark of 136.89, then May 1998 at 139.26. Support levels stand at 135, 133.20, and then 131.35.

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