Tough signals from the Bank of Japan made at the last meeting couldn’t help the yen to regain lost positions. The currency continued to depreciate against the U.S. dollar. The weak dynamics are associated with the strengthening of the dollar index. We recall that the American currency continued to grow after the release of the consumer price index (CPI) last week. The data showed an increase in annual inflation, but it was below analysts' expectations.
The yen fell to levels that triggered an intervention to buy the national currency last September. Minister of Finance Shunichi Suzuki said the authorities are monitoring the currency pair's trends and will act if necessary. The yen depreciated about 3% after the Bank of Japan approved the higher government bond yields on July 28.
The head of Asian currency research at HSBC Holdings Plc believes the Ministry of Finance will start reacting to the weakening of the pair in the 145-148 range.
New statistics indicate the stability and sustainability of the U.S. economy. Most of Fed’s representatives and economists think there are low chances of recession.
Nevertheless, Fed officials express fears that the fight against inflation is not over yet. As a result, the regulator may keep tight monetary policy longer. However, no interest rate hike is expected at next month's Federal Open Market Committee (FOMC) meeting, as per the CME FedWatch tool. It has an 88.5% probability to remain at its current level.
A strong economy on the back of high rates strengthens the U.S. dollar against all world currencies.
According to the technical analysis, the USDJPY pair has updated the highs of this year. This trend seems to continue, as the Bank of Japan doesn't hurry to intervene now. Most likely, the interventions will be at the highs of last year.
The currency pair may continue the uptrend. The growth target will be at the level of 148. There is the resistance boundary and last year's retracement when the Bank of Japan intervened in currency pricing. We will place a stop-loss when going below the last high of this year, which corresponds to 144.
Increase in USDJPY:
Take profit — 148
Stop-loss — 144