VOT Research Desk
Nov1,2022
Market Analytics and Considerations
Record monthly amounts of official intervention have been recorded in USD/JPY.
Nevertheless, there is still no solid foundation for the Japanese Yen.
Markets anticipate rate hikes from the Fed in the short term, but less hawkish language is expected.
In a market that is clearly getting ready to hear what the United States Federal Reserve will do and, perhaps more importantly, say at the conclusion of its midweek meeting on Wednesday, the Japanese yen saw some modest gains in Tuesday’s trade.
The market expects the United States’ interest rates to rise by another three-quarter point, the latest in a series of moves to curb inflation. The Fed’s tone will be the primary focus of market attention if this is implemented. Economists are generally in agreement that the central bank will refrain from issuing statements that are overtly hawkish and instead stress that the rate at which it raises interest rates in the future will largely depend on how inflation is currently performing.
Naturally, this year’s rise in US interest rates has provided the dollar with extraordinary support against all major currencies. Even though the Bank of Japan is still unwilling to raise its own extremely low borrowing costs, the Yen has been particularly hard hit. The USD/JPY exchange rate has returned to levels around 150, a level not seen since 1990, as a result of the widening yield spread in favor of the greenback.
JAPAN’S Specialists HAVE Pulled out all the stops ON Mediation
As far as concerns them, the Japanese specialists have selected to act in the market to attempt to pad the Yen’s fall. According to reports, Japanese Finance Minister Shunichi Suzuki stated on Tuesday that the nation’s currency interventions have been “stealth operations in order to maximize their effects. “This comment was made after Tokyo spent a record $43 billion last month to support the troubled Yen. It will probably spend a lot more in the coming months.
Haruhiko Kuroda, the long-serving governor of the Bank of Japan, stated on Tuesday that the country’s economy needs to be supported by ultra-loose monetary policy in the wake of Covid 19. because of this, bears appear likely to keep an eye on the Yen, at least while other central banks tighten their own monetary screws. If the Fed sounds more dovish than the market expects this week, there may be some room for a small comeback; however, for the time being, the main fundamental hope for the Yen is probably that the aggressive but covert official intervention continues
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Technical Evaluation of the USD/JPY:
The USD/JPY daily chart reveals that the pair has yet to recover from the unusually sharp falls at the end of last week, which may have been bolstered by official action to bring the Dollar down a little.
The pair may struggle to gain traction to the upside in the near term if Dollar bulls are now watching for this action on any approach to 150. However, exploratory upward forays toward that crucial psychological level remain likely.
To the downside, meaningful support appears to be quite limited at the current market levels.
However, a group of props from trading between September 6 and October 4 appears likely to protect the first, 23.6% Fibonacci retracement of the long rise from the lows of August 2021 to the historic peaks of last month. at 141.611, but Yen bears are likely to fiercely challenge the 142-145 region above it.
But in a consolidation move, the market may stick around in that area longer before moving higher.
