Oct 30, 2022
VOT Research Desk

Market Insights, Considerations & Analytics

Fundamental -KEY FORECAST: NEUTRAL FOR THE JAPANESE YEN

Although interventionist measures may have had an impact on USD/JPY rates, the Japanese Yen was generally weaker during the final week of October.

As long as the Bank of Japan continues to implement its QQE with yield curve control strategy, it is still true that the Ministry of Finance’s efforts are unlikely to result in a sustained decline in the value of the yen.

The Japanese Yen has a primarily gloomy bias going into the initial days of November

A pullback in US Treasury yields helped the Japanese Yen finish stronger against the US Dollar last week despite being buffeted by fresh intervention at the start of trading. USD/JPY rates decreased by -0.14%; the pair fluctuated between gains of 1.4% and losses of 1.72%.

The interest rate differential between the Yen and other major currencies will continue to exist as all other key central banks raise rates to fight inflation while the Bank of Japan continues to implement its QQE with yield curve control strategy. Therefore, the Ministry of Finance’s efforts at intervention will resemble Humpty dumpty dragging his rock up a slope.

The fact that incoming Japanese economic data may not have as much significance is still true in the wake of the October BOJ meeting and the Japanese Ministry of Finance’s most recent intervention, just as it was in the wake of the September BOJ meeting and the September 22 MOF intervention. The lack of an active economic calendar will keep traders looking to the newswire for any new information on measures.

October Japan Consumer Confidence and September Japan Housing Starts are due at 5 GMT on Monday, October 31.

The October BOJ meeting minutes will be released at 23:50 GMT on Tuesday, November 1.

Weekly Japan Foreign Bond Investment statistics are scheduled at 23:50 GMT on Thursday, November 3.

Technical Perspective

Last week, USD/JPY maintained its containment under 151.93, and the prognosis remained the same. This week’s opening viewpoint is neutral. Another decline might occur, but the fall should be restrained by the 143.69 38.2% retrace of the 130.38 to 151.93 range to produce a recovery. A break over the modest resistance level of 149.69 will cause a stronger bounce back more toward the 151.93 top. But for the corrective pattern to persist, upward should be constrained there.

The overall uptrend from 75.56, which includes the upswing from 101.18, is continuing in process (2011 low). The high of 147.68 from 1998 has already been reached, and there are now no overt signals. In any case, the first indication of an intermediate top trend would be a violation of the 140.33 support level. If not, further growth is advantageous to the subsequent aim of 160.16 (1990 high).

To reach the 138.2% prediction at 168.47, 149.26 must first be crossed. As long as the 130.38 support persists, this will continue to be the preferred scenario.

Note that last week highlighted, “ongoing divergence since the May high and looking to see if this stretch marks a third reference high, raising the threat for near-term exhaustion.” Indeed weekly RSI has marked a third divergence reference point and further highlights the threat of a larger pullback here. The warning flags are up.

Weekly Technical Indicators

USD/JPY

Weekly Simple Moving Averages (SMA)

Weekly Pivot Points Fibonacci