Chapter 83 11/13 USDJPY: Breakout Above Last Year's Highs Likely to Cement, Yen Bulls Need to Maintain Patience
Summary: The USDJPY pair initiated a new uptrend from the support level of 149.20, with bulls breaking through the significant bearish trendline near the 150.00 resistance level in the 4-hour chart. Intraday, the pair briefly rose to 151.85, marking a fresh yearly high with a gain of 0.14%.
Fundamentals
The continuous widening of interest rate differentials between Japan and the US has pushed the Yen to new lows against the US dollar for the year. During the Asian session, the USDJPY briefly surged to 151.85, reaching its highest level since October and touching a 30-year peak. This situation increases the possibility of Japanese authorities intervening to support the currency.
Earlier, on November 1st, Japan's Vice Finance Minister, Masato Kanda, stated that Japan is ready to intervene in the currency market if necessary.
Currently, investors are awaiting a new batch of US inflation data, with expectations that this week's release will provide further clues on whether the Fed has more work to do in curbing inflationary pressures. If economic data released this week shows strength, pushing the USDJPY to the 152.00 range will definitely play a role. Alternatively, the continuation of a more favorable risk environment may attract carry trade buyers, increasing positions and testing the measures taken by the Bank of Japan.
Currently, the policy of the Bank of Japan is expected to continue weighing on the Yen. In the past week, the yen's trade-weighted exchange rate fell to multi-year lows, adding to ongoing inflationary pressures. Consequently, the yen may further depreciate, and the Bank of Japan appears to be lagging behind the situation. So far, the Japanese Ministry of Finance has not conducted forex interventions. We believe that the Bank of Japan is making a policy mistake, and therefore, we continue to expect an increase in Japanese government bond yields.
Technical Analysis
The USDJPY bulls remain resilient, holding above the 149.20 level and initiating a new uptrend above the 149.80 resistance level.
Looking at the 4-hour chart, the bulls have broken through the major bearish trendline. Additionally, the asset's price is significantly above the 150.00 level, the 100SMA, and the 200SMA.
However, the bulls face resistance near the 76.4% Fibonacci retracement level of the downward movement from the high point of 151.70 to the low point of 149.19. The primary resistance still lies near the 151.70 level. Closing above the 151.70 and 152.00 levels could open the door to further upside potential.
If not, the asset may retest the 150.00 support level. The first major support is currently forming near the 149.50 level, and below this support, the market may test the 149.20 pivot level in the short term.
The USDJPY successfully held the 148.80 support level in the recent correction, which is the low point from late October. This test resulted in a rebound. The asset is currently challenging the peak near 152.00 from early 2022. A breakout above this resistance could extend the upward trend to the next key resistances at 152.80 and 153.60.
On the other hand, significant downside risk for the bears would only emerge if there is a break below the recent pivot low near 148.80. The next key support sits at 147.50. In terms of trading, a bias on buying the dips is recommended.
Trading Recommendations
Trading Direction: Long
Entry Price: 151.70
Target Price: 152.80
Stop Loss: 148.70
Valid Until: 2023-11-27 23:55:00
Support: 150.00, 149.20, 148.80
Resistance: 151.94, 152.00, 152.80
