Sep 27, 2022, 3:30 PM (+05:30)
VOT Research Desk
Discussions and Consideration
Unless Yen volatility returns, the BOJ is unlikely to intervene further in forex markets.
The key is 145.00 resistance.
Today, a number of Fed policymakers are scheduled to speak.
Fundamental Backdrop of USD/JPY On a Monday that proved to be interesting for markets as a whole, the USD/JPY continued its upward rally. As the dollar index reached new highs around 114.50, the US dollar was generally stronger. The Bank of Japan’s (BoJ) FX intervention last week resulted in the Yen losing approximately 75% of its gains, which saw the pair reach a high of 144.810.
The Bank of Japan (BoJ) has remained an outlier in the global tightening race as we enter Q4, while the US Federal Reserve has maintained its hawkish rhetoric. According to the forward guidance from the meeting last week, the Fed anticipates continuing to raise rates with a year-end target of 4.5-4.75%.
Yesterday, Fed policymaker Loretta Mester said that higher rates are needed to keep inflation under control. Today, fellow policymaker Charles Evans said that the Fed’s number one job is to keep inflation under control if a tougher rate environment lasts for a while. The Fed Chair, Jerome Powell, will speak later in the day, followed by policymakers James Bullard and Neil Kashkari, whose rhetoric is anticipated to remain unchanged.
In his forward guidance following the meeting last week, Bank of Japan (BoJ) Governor Haruhiko Kuroda stated that forwarding guidance would not change for two to three years. The Finance Minister decided to intervene in the foreign exchange markets for the first time in 24 years as a result of this spike in Yen volatility.
Despite this, Governor Kuroda and Finance Minister Shunichi Suzuki have both reiterated that their goals are not to maintain price levels but rather to deal with increased volatility and exaggerated movements.
From a technical standpoint, we have had two days of bullish price action, with yesterday’s daily candle closing as a marubozu – candlestick, a sign that further upside may be ahead. As long as the Yen weakens gradually without spikes in volatility, the likelihood of further intervention remains low. We continue to trade between 141.50 and 145.00, necessitating a four-hour candle close above 145.00 to move forward.
We are trading above the 20-, 50-, and 100-SMAs, which should act as support in the event of a slight price decline. We should test the 1998 highs at 147.75 or push toward the crucial psychological 150.00 level if we make a bullish move above that level.
Major Intraday levels
Support Areas
•143.50
•142.60
•141.50
Resistance Areas
•145.00
•147.75
