- As predicted, buying the US dollar against the Japanese yen from each bearish level has seen the currency pair steadily move closer to the psychological resistance of 160.00, above which there is growing talk of imminent Japanese intervention in the foreign exchange markets to prevent further collapse Japanese yen.
- Bulls have driven the USD/JPY pair towards the 158.55 resistance level, the highest level for the currency pair in more than five months.
Japan plans to prevent further yen collapse
In this regard, Japan’s finance minister recently reiterated his warning against unilateral speculative moves in the foreign exchange market, stressing the government’s readiness to intervene if excessive volatility continues. In trading, the Japanese yen was under pressure due to growing uncertainty about the timing of an interest rate hike by the Bank of Japan. Bank of Japan Governor Kazuo Ueda confirmed that any policy adjustments will depend on economic, price and financial conditions, stressing the importance of sustainable wage growth. Also, the Bank of Japan emphasized the need for caution in light of domestic and global uncertainties.
Trading Tips:
USD/JPY will remain on an uptrend until Japanese intervention, given that Trump does not like market interventions.
Has the US dollar reached its peak?
According to a new Bank of America analysis, the US dollar is “perfectly priced.” If true, it means the current strength trend is nearing its limits, which could ease pressure on global currencies. Athanasios Vamvakidis, an analyst at Bank of America, says: “A lot of the price of the US dollar is in this context. The US dollar has reached a historically extreme value.”
Looking at the Bank for International Settlements real effective exchange rate index, the US dollar is at its strongest in 30 years. Estimates from the International Monetary Fund’s Real Effective Exchange Rate Equilibrium Model lead Bank of America foreign exchange analysts to a similar conclusion. Analysts there said: “The US dollar appears to be overvalued by 18.5%, the most in 30 years, except when it was overvalued by 19% during the energy shocks of the Ukraine war in 2022.”
According to foreign exchange trading, the US dollar was the best-performing currency in 2024, topping the leaderboard after rallying since October amid signs of a recovery in US economic growth and inflationary pressures. These expectations only built up after Donald Trump’s election victory in November. This prompted the Federal Reserve to warn that it was likely to significantly slow the pace of interest rate cuts in the US. In fact, after Tuesday’s strong US data, the market does not expect another contraction in the first half of the year.
USD/JPY technical analysis and expectations today:
Dear reader, as predicted earlier, the overall trend of the USD/JPY pair will remain bullish. Technically, the bulls can quickly reach the psychological resistance of 160.00 as long as the US dollar is strong and there is no Japanese intervention in the currency markets. A higher-than-expected US jobs report could give the bulls that chance. Meanwhile, the currency pair is on track for another weekly bullish close and may stay until Trump’s inauguration this month. Volatility indicators, relative strength index and MACD are on their way to overbought levels. To break USD/JPY’s uptrend, the bears must first move towards the 155.50 support level. finally, we still prefer to buy USD/JPY from any downside level.
Want to trade our daily forex analysis and predictions? Here is a list of forex brokers in Japan that you can check out.