Yen weakness and US dollar momentum drive USDJPY up. Strength in the US dollar propels USDJPY to a new six-week peak. Bulls play the monthly rising wedge at 133.00. A definite downward breach below 130.60 verifies a rising arch and may alert sellers.
Yen looks at the new governor of the BoJ will have a lot on his plate right now.
Now next governor of the Bank of Japan (BoJ) has now been appointed: Kazuo Ueda by the Japanese government. Who will take over from current incumbent Haruhiko Kuroda on April 8? And, inherit a challenging set of issues.
According to existing data, Japanese y/y inflation topped 4% in December, the highest number since January 1991, while Fourth – quarter growth was below estimates of 2% annualized growth and increased by a meager 0.6%.
Japanese Inflation Timeline – 25 Years
Source: Ministry of internal Affairs & Communication
The incoming head of the central bank will have to determine when and how far the BoJ needs to begin easing up on its sleek monetary policy in order to control inflation.
Yet leaving enough financial room for the economy to expand. As other nations have discovered recently, it gets increasingly more difficult to reduce inflation once it takes hold.
The incoming BoJ governor is unlikely to make any declarations on his first day in office, though. It is expected that soon after Mr. Ueda starts his 5 jobs, news of probable policy changes will start to surface.
Yen to US dollar prognosis
Since the middle of January, the USDJPY has been moving higher. As marketers attempt to account for any modification or degree of the monetary policy of Japan relative to the US currency.
It has gained new energy following the recent positive US CPI and Jobs Report (NFP). The USDJPY rate has returned to values previously seen on January 6. It keeps creating higher peaks in a short-term bullish formation.
The duo is now trading close to short-term resistance off 3 recent high readings around 134.50 and 134.80, despite breaking above other the 20-DMA as well as the 50-DMA.
Yen has Inconclusive Retail Market participants
According to data from retail traders, 43.50 percent of traders are net long, and the short-to-long ratio is 1.30 to 1.
In comparison to yesterday, there are 6.39% more traders who are net long than there was last week. While the percentage of traders who are net short is 10.18%. Greater than the previous week and 0.78% less than yesterday.
The fact that traders are net short means that the USDJPY exchange rate may rise further. Positioning is more net-short from last week than it was Tuesday. We have an additional mixed USDJPY trading tendency as a result of the present mood and previous adjustments.
Westpac predicts that by the end of 2024. The USDJPY will decrease steadily toward the 124 mark
Given the shift in sentiments towards the US dollar, Japan’s strong growth potential, and its proximity to the Asian area. Where momentum and opportunity are obviously emerging. It seems most logical to expect the Yen to, more or less, follow the US Dollar trend over the projected period.
By the end of 2023, the USDJPY is only expected to soften to 129. The decline is anticipated to intensify, with 124 as the aim for the end of 2024. As rate cuts are implemented in the US and the rate disparity shrinks.
Comparison of the yen and the US dollar Cross
After a 2 rally, USDJPY bulls take a break early on Wednesday morning in Europe as it softens to 133.00 before press time. But the Yen pair is still hovering around the preceding day’s 6 top.
In order to renew the monthly top on Tuesday, USDJPY buyers applauded the breakout of the 50-DMA to the upside. And, as positive MACD indications and firmer RSI (14).
The recent optimistic bias, however, didn’t seem to be accepted by the market. Which appeared to have questioned the quote’s potential upward.
As a result, the DMA breakthrough joins optimistic oscillators to support the bulls. Although the upward potential seems to be constrained to the top line of the indicated wedge. Which is close to 133.60.
Whether or not the quote moves over 133.60, the 200-DMA area near 136.90 will come before a two-month-old horizontal resistance territory near 134.50-70 to check the USDJPY bull traders.
Retracement moves, however, are still difficult to make unless they stay above the 132.00 50-DMA line.
Key Technical Levels to Watch
