Japanese Yen (USD/JPY) Analysis

• USD/JPY goads Japanese officials after latest move above 150
• Japanese government bond yields rise, prompting more buying from the BoJ
• US PCE data tomorrow and the Bank of Japan meeting concludes on Tuesday
• The analysis in this article makes use of chart patterns and key support and resistance levels. For more information visit our comprehensive education library

USD/JPY Goads Japanese Officials after Latest Move Above 150

USD/JPY price action has been frustrating to watch as it essentially flatlined before the latest move into what many consider to be the threshold for FX intervention – the 150 level. The pair was trading around 150.50 before witnessing moderate selling pressure to bring it back below 150, only to return immediately.

USD/JPY 5-Minute Chart

Source: TradingView, prepared by Richard Snow

The pair has, for the most part, heeded consistent warnings about undesirable moves that do not accurately reflect fundamentals. However, a recent run of better-than-expected US data and rising yields have pushed the dollar higher. The Bank of Japan has also stated it will not rush to change its accommodative monetary policy stance until the data suggests that inflationary pressures are being driven by demand side factors and not supply side effects. Therefore, with no anticipated movement on the interest rate front and no clear indication of adjustments to the yield curve, the yen exhibits few bullish drivers.

The 50 simple moving average (SMA) has underpinned price action and can be seen as a dynamic level of support however, in the event officials intervene in the FX market they would be looking for a sizeable response – potentially seeing the pair trade below 146.50 and 145.00. Keep an eye out for a possible strengthening of language used by officials with more urgency.

USD/JPY Daily Chart

Source: TradingView, prepared by Richard Snow

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Japanese Government Yields Push Towards the 1% Marker

Following in the footsteps of the US, Japanese government bond yields have been steadily rising, forcing the BoJ to step in and purchase bonds to keep government borrowing costs from spiraling.

In a recent Reuters poll as many as two thirds of respondents anticipate the Bank of Japan will withdraw from negative interest rates in 2024. The BoJ Governor himself has said that the bank will have enough data by the end of 2023 to determine if a policy U-turn is needed. Therefore, expectations for next week’s meeting is for no change in rates but another tweak to the yield curve control policy can not be dismissed.

10-Year Japanese Government Bond Yield

Source: TradingView, prepared by Richard Snow

— Written by Richard Snow for DailyFX.com

Contact and follow Richard on Twitter: @RichardSnowFX