After a sudden policy shift from the BOJ, we saw the market trend reverse course and fall from the 140s all the way back to 131.
It is mind-boggling that top national currencies are this volatile, but here we are.
Now the overreaction to the policy shift has retraced a bit and we are back at 134.
Either a dovish hint by Powell or another hawkish step by Kuroda could have us see a retest of 124.
What is priced in is Powell slowing raises into spring 2023 and then leveling off, and Kuroda continuing to bide his time with no more major shifts.
This is the most likely scenario and would probably have us continue ranging 130-140.
However, any event that requires the FED to shift policy even slightly more dovish will dump this pair to retest 124.
That is something we should be ready for and expect. If that happens, 124 is a very strong entry point.
Notice that the arc still has many years to play out the slow death of the yen.
It is irrational to be optimistic about the yen long term.
Longer term, both technically and fundamentally, USDJPY is heading to 200 this decade and then to infinity and beyond.
It is mind-boggling that top national currencies are this volatile, but here we are.
Now the overreaction to the policy shift has retraced a bit and we are back at 134.
Either a dovish hint by Powell or another hawkish step by Kuroda could have us see a retest of 124.
What is priced in is Powell slowing raises into spring 2023 and then leveling off, and Kuroda continuing to bide his time with no more major shifts.
This is the most likely scenario and would probably have us continue ranging 130-140.
However, any event that requires the FED to shift policy even slightly more dovish will dump this pair to retest 124.
That is something we should be ready for and expect. If that happens, 124 is a very strong entry point.
Notice that the arc still has many years to play out the slow death of the yen.
It is irrational to be optimistic about the yen long term.
Longer term, both technically and fundamentally, USDJPY is heading to 200 this decade and then to infinity and beyond.
Note
The arc remains intact, with a pennant pattern forming as the pair continues to top out at around 150.The pennant pattern - and also the inverse head and shoulders in this chart - converge on a target near the end of the blue line at 202.23.
The timing is more difficult to estimate but with this chart it will be sometime in 2025.
Saving your wealth in yen is insanity at this point.
Note
Resistance at 150 has broken decisively (now at 155.30). This confirms the bullish pennant with the target at 202 mentioned above. It's probably going to be a slow burn with plenty of interventions and policy shifts along the way.
The days of seeing Japanese tourists visiting the US and Europe are over.
Note
The steady path to 200 USDJPY continues despite BOJ interventions. We've reached another milestone here at 159-160. This is a point of resistance last reached in April 1990, when there was a sharp turn to the downside after a small recovery. This may hold for a while as a line in the sand. However, we have now established strong support at 150, so I expect there to be some bouncing around 150-160 before breaking through to the next resistance level.
Note
As foreseen in the previous comment, the resistance area from April 1990 at 162 proved to be a turning point, sending USDJPY down to 142 before recovering to 149, and now leveling out at 146. The BOJ has essentially stated that there will be no more hikes, while I believe the FED will be even more leery to make cuts this year due to inflation concerns and the purchase and holding of US bonds as part of the yen carry trade that would be threatened by rate cuts.
I'm betting on 0-.5% cut rather than the 1-1.5% most of the market is pricing in.
In that scenario, the carry trade will continue, the yen will continue to weaken, while the Japanese government installs assistance programs to help citizens deal with inflation. This short term solution further debases the yen long term, as is needed by the Japanese government to service their enormous debt and provide social services to their aging population.
The road to 200 and beyond continues, make no mistake. This was a healthy correction, and a good chance to unload yen or get in on the carry trade while the yen is still showing strength.
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Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.