Japanese Yen Update - Prices, Chart, and Analysis

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Recommended by David Cottle How to Trade USD/JPY The Japanese Yen ticked lower against the United States Dollar on Wednesday, with USD/JPY getting mighty close to the sort of level that might force authorities in Tokyo to intervene.

The Dollar is of course benefitting against most rival currencies from a broad re-pricing of interest rate expectations. The resilience of pricing and economic growth in the world’s biggest economy has seen the prospect of lower rates pushed back, with the likely scale of cuts this year also reined in.

Despite historic monetary tightening this year, the Yen still offers comparatively paltry returns so it’s perhaps unsurprising to see it on the ropes. USD/JPY has risen from 140.00 to within a whisker of 155.00 this year with the Yen skirting 35-year lows. The acting chair of Japan’s ruling Liberal Democratic Party Satsuki Katayama reportedly said on Tuesday that intervention in the currency market to bolster the Yen could come at any time given that its weakness is felt to be excessive and out of line with economic fundamentals. This is only the latest in a string of similar comments out of Tokyo, and the market is clearly on watch for action should the Dollar surge far above 155.

Next week will bring the ‘Golden Week’ holiday season in Japan. The accompanying lower market liquidity might tempt interventionists, offering more bang for their buck. The Bank of Japan will announce monetary policy on Friday. On balance, it may want more inflationary evidence before it tightens rates again, but the meeting will be in play for traders nonetheless given the premium placed on official thinking in Japan now.

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The pair has been driven dramatically higher since the start of this year, with its steep uptrend having now left the 200-day moving average nearly eight full Yen below the current market. This may well be ammunition for those in Tokyo who think current market action is divorced from the fundamentals.

For now, the 155.00 psychological resistance level is capping the market and, the longer it continues to do so the higher the chances of a meaningful reversal given the sheer speed of the uptrend.

Indeed, there may not be too much meaningful support on the downside until the trading band seen between February 9 and April 10. The top of that comes in at 151.86, with the base at 149.16

Should Dollar bulls force a break above 155.00 they are likely to face quite strong resistance around 155.50 even if there is no official action from Tokyo to slow the greenback’s progress.

--By David Cottle For DailyFX