USDJPY on the verge of decline due to increased risk of currency intervention

25 April 2024 141
USDJPY on the verge of decline due to increased risk of currency intervention

The USDJPY currency pair has reached the levels of the mid-1990s due to the passivity of the Bank of Japan. As the head of the regulator Kazuo Ueda noted, aggressive rate hikes are unlikely due to the fragility of the Japanese economy. He estimated that this supports expectations of low and long-term interest rates and strengthens the position of supporters of yen depreciation. However, Ueda hinted at a possible rate hike by the Bank of Japan later this year.

 

Market participants expect the Bank of Japan to keep interest rates unchanged at its two-day meeting ending Friday.

 

The yen fell below 155 to the dollar on Thursday, a level seen as authorities' line in the sand. This heightens the chance of currency intervention.

 

Meanwhile, the dollar index is consolidating near the 105.50 mark. Investors are awaiting US economic data for further clarity on the Federal Reserve's interest rate path.

 

Traders are waiting for the US Q1 GDP due today. Of greater interest, however, is Friday's PCE report. Unexpectedly high consumer prices in March forced investors to push back their expectations for the Fed's first rate cut to September

 

Recent statements by Fed representatives hint that there’s no rush to lower interest rates.

According to the technical analysis, USDJPY is forming an ascending trend on the D1 timeframe.

 

Divergence of the RSI (standard values) on the H4 timeframe indicates a possible change in the price trend. The indicator is in the overbought zone.

 

The strong news background could bring the currency pair closer to the resistance of the ascending channel, which will increase the risk of currency interventions in Japan. This scenario implies a sharp decline in the price of the currency pair.

 

Signal:

The short-term outlook for the USDJPY currency pair is to sell.

The target is at the level of 153.40.

Part of the profit could be fixed near the level of 154.90.

The Stop-loss could be placed at 157.150. 

 

The bearish trend is of a short-term nature, so it is suggested to limit the trading volume to no more than 2% of your capital.

This content is for informational purposes only and is not intended to be investing advice.

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