USD/JPY: Approaching Historical Highs Amid Mixed Signals
Updated
The USD/JPY pair is now trading near 30-year highs, reflecting a huge difference in the strength of the US dollar and the Japanese yen. Japan has not seen a significant economic downturn, but the value of the yen has fallen dramatically. For traders, this unusual situation offers both opportunities and dangers.
Technical Analysis: Key Levels and Divergence
Technically speaking, on April 29th, the USD/JPY hit a high of 160.209. Given the current momentum, I think that this pair will break through the previous high. Although the pair is overbought, technical indicators—particularly divergence patterns—indicate that there may be further bullish movement before a correction takes place.
Economic and Political Aspects: The Function of BOJ
A key factor in the yen's depreciation has been the Bank of Japan (BOJ). In the past, Japan's central bank followed a policy of negative interest rates in order to promote economic growth, which reduced the value of the yen in relation to other currencies. The yen has failed to strengthen even after the strategy discontinued in March 2024 and interest rates were raised for the first time since 2007.
With a value of less than ¥160 to the US dollar, the Japanese yen is at its lowest point in 34 years. The reason for this significant depreciation is Japan's easy-money policy, which was intended to stimulate the economy but instead made the yen the worst performing major currency in 2024, falling more than 13% compared to the US dollar.
The tale of the "Widow Maker Trade"
The Bank of Japan (BOJ) has historically been a tough bet, leading to the name "widow maker trade." The BOJ's interventions and Japan's considerable foreign exchange reserves haven't prevented attempts to stabilise the yen from failing dramatically. Japan's intervention in late April, which involved investing $60 billion to buy yen and sell dollars, only offered short-term relief.
Future Opportunities and Risks
Even while the yen's decline seems expected, a more assertive BOJ strategy may reverse the trend. However, without clear instructions or significant policy adjustments, yen volatility is expected to continue. The uncertainty is increased by the BOJ and the Ministry of Finance's continued silence over possible future interventions or interest rate hikes.
In summary
The current trend of the USD/JPY pair points to a possible break above the previous high of 160.209. You should stay cautious, taking into account both technical signs and the prospect of a BOJ intervention. Long-term yen depreciation, coupled with Japan's export-import dynamics and poor monetary policy, creates an environment friendly for the FX market volatility and speculative opportunities.
Technical Analysis: Key Levels and Divergence
Technically speaking, on April 29th, the USD/JPY hit a high of 160.209. Given the current momentum, I think that this pair will break through the previous high. Although the pair is overbought, technical indicators—particularly divergence patterns—indicate that there may be further bullish movement before a correction takes place.
Economic and Political Aspects: The Function of BOJ
A key factor in the yen's depreciation has been the Bank of Japan (BOJ). In the past, Japan's central bank followed a policy of negative interest rates in order to promote economic growth, which reduced the value of the yen in relation to other currencies. The yen has failed to strengthen even after the strategy discontinued in March 2024 and interest rates were raised for the first time since 2007.
With a value of less than ¥160 to the US dollar, the Japanese yen is at its lowest point in 34 years. The reason for this significant depreciation is Japan's easy-money policy, which was intended to stimulate the economy but instead made the yen the worst performing major currency in 2024, falling more than 13% compared to the US dollar.
The tale of the "Widow Maker Trade"
The Bank of Japan (BOJ) has historically been a tough bet, leading to the name "widow maker trade." The BOJ's interventions and Japan's considerable foreign exchange reserves haven't prevented attempts to stabilise the yen from failing dramatically. Japan's intervention in late April, which involved investing $60 billion to buy yen and sell dollars, only offered short-term relief.
Future Opportunities and Risks
Even while the yen's decline seems expected, a more assertive BOJ strategy may reverse the trend. However, without clear instructions or significant policy adjustments, yen volatility is expected to continue. The uncertainty is increased by the BOJ and the Ministry of Finance's continued silence over possible future interventions or interest rate hikes.
In summary
The current trend of the USD/JPY pair points to a possible break above the previous high of 160.209. You should stay cautious, taking into account both technical signs and the prospect of a BOJ intervention. Long-term yen depreciation, coupled with Japan's export-import dynamics and poor monetary policy, creates an environment friendly for the FX market volatility and speculative opportunities.
Note
Todays BoJ Summary of OpinionsMeeting summary: Given potential risks related to inflation and the weakening of the yen, there is a possibility that the BoJ will intervene. However, given reduced consumption and uncertain economy, the BoJ is likely to stick with current weak monetary policy in the near future.
Overall, market also is very cautious right now, might be that we will see some sharp movements during NY session.
Don't forget, there's no pullback-free trend. If this pair tends to go higher, I expect pullback so it gains the power to break previous highs.
Note
I hate to admit it, but the recent pullback, aka liquidity grab, from 159.6 levels to 158.75 could be a signal for further growth.Especially if it results in a bounce back, suggests a potential accumulation of buying interest at lower levels.
Note
USD/JPY breaks 30-year highs, now at 160.373, above the old high of 160.209. Even though it's high, it might keep going up.💼 Japan's money policy makes the yen weak, and efforts to fix it haven't worked. Did they even did something yet?
🌐 Therefore, thre's no clear plan from Japan's bank means more ups and downs for the yen.
Keep it simple.
Note
A bit of news from today: The Japanese government is watching the currency market bend over the yen and might take action soon. Some experts think USD/JPY could drop to 120 in the next 18 months, while others expect growth. It's decision time for the big boys. Most likely, Japanese officials won't intervene until US economic data comes out on Friday. Meanwhile, we can expect ups, downs, and some blown accounts.Note
History lesson:The Japanese government stepped in to help the yen twice this year, on April 29 and May 2. They did this because the yen was getting weaker compared to the strong US dollar. The exact times of these actions were different each day, but the Ministry of Finance shared the details of intervention on May 31, 2024, at 00:53 GMT.
Trade active
Todays update:US Inflation: The prices of things in the US stayed the same as expected, so there was no big reaction from the markets.
New Currency Boss in Japan: Atsushi Mimura is now in charge of Japan's currency, taking over from Masato Kanda.
New Finance Leader in Japan: Hirotsugu Shinkawa is the new Vice-Minister of Finance, replacing Eiji Chatani.
End of June Trading: Today is the last trading day of June, which means it's the end of the second quarter, and lots of options will expire soon.
What does it mean for you? Idk, but for me:
SELL 160.84
TP1 158.2 ; TP2 157.4
SL 162
Good luck, folks!
Order cancelled
Closed at break even before weekend :)
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