After a short pause at the beginning of the week the USDJPY currency pair continued to move upward. The level of 143 was reached yesterday, and today it is only slightly below 143.5. The price is getting closer to the most important level of 145, but so far there has been no official information about currency interventions by the Bank of Japan. The probability of intervention by the financial regulator is getting higher, but USDJPY has a good chance to rise above 145 before the massive operations of supporting the yen.
The gap between the Bank of Japan's ultra-soft monetary policy and the actions of other central banks continues to grow. This week, Fed Chairman Jerome Powell confirmed the need for one or two more interest rate hikes by 0.25%. The Bank of England yesterday increased its key rate by 0.5%, warning about the possibility of a similar move at the next meeting.
Even a higher inflation rate, which was worse than expected again, does not lead to a significant change in the rhetoric of Japanese officials. Market participants are suggesting that the Bank of Japan, unlike last fall, will not start a massive sale of dollars and buy the yen after the USDJPY overcomes the level of 145.
Japanese officials, commenting on the currency interventions, noted: the fact that the yen is falling is not important, only the sharpest price movements should be under attention. From this point of view, there are not many reasons to actively intervene in the currency market: now, unlike last fall, the volatility of USDJPY has decreased significantly. This can be seen in the chart provided by Bloomberg:
The rise of the USDJPY to 145 is still ahead, but for now the bulls can focus on the 143.5 and 144 levels. The technical indicators, which are still quite far from entering the overbought zone, also speak in favor of the growth continuation.
The following trading strategy option can be suggested:
Buy USDJPY in a range of 142.5-143. Take profit 1 – 143.5. Take profit 2 – 144. Stop loss – 141.5.
Also, traders may use Trailing stop instead of a fixed Stop loss at their convenience.