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This week could set long-term trend of USD/JPY The USD/JPY has been one of the most interesting pairs to trade in 2022. The pair has had it all, including hitting record highs and central bank intervention. But the year is not over, and some more market events are primed to possibly inject a little more volatility into the pair. Tomorrow will be the Bank of Japan’s interest rate decision. While markets expect the bank to maintain its negative interest rate, it will be interesting to see if the bank starts to prepare the market for a potential tightening in the future in its post-decision address, now that the annual inflation rate in Japan reached 3.7% in October 2022. On Thursday we get to see how much higher inflation reached in November, with markets expecting a reading of 3.9%. In the lead up to these two major market events, it is appropriate to look at the technical perspective of the USD/JPY. The solid uptrend trend in the pair peaked after reaching 152.000 in October, after which the USD/JPY reversed, creating a series of lower lows in the daily chart. Subsequently, it broke below the upward trend channel. The price also retested the trend line at 142.200, a former strong demand zone. Looking at the current price action on the daily timeframe, we can see that the USD/JPY is currently in a consolidation period between 138.000, which is the resistance area, and 134.000, which is the support area. Technically, since the short-term bias for the USD/JPY is currently downtrend according to the mini trend channel drawn above, we might expect a possible breakout to the downside once the 134.000 support area has been broken. If it happens, targets include 133.000, 131.000, and 127.000 if fundamentals support the momentum. However, countering this outlook is the Know Sure Thing or KST, a momentum-based oscillator. The indicator is currently showing a bullish crossover. This crossover might suggest that there is also a possibility that a breakout to the upside might occur. Suppose the price for USD/JPY breaks above the 138.000 resistance area and closes above the mini trend channel. In that case, this might indicate that the downtrend since October might be another pullback, and the long-term bias for USD/JPY is an uptrend.
by BlackBull_Markets
USD/JPY: Trend reversal. What's next? The Japanese yen was the strongest performing currency this week, rising about 4% against the US dollar, with USD/JPY plunging below 134 to levels not seen since mid-August. Two favourable fundamental developments have fueled the yen's strength: a) Federal Reserve Chair Jerome Powell said that US interest rates might be hiked more slowly starting in December, thus effectively anticipating a 50 basis point raise. On top of that, the latest stream of US data signalled that economic activity is slowing in this quarter pushing speculators to trim expectation for Fed interest rates in 2023. The yield on the US 10-year note dropped by another 15 basis points to 3.52% this week, putting it on course to notch its fourth consecutive week of declines. b) Asahi Noguchi, a Bank of Japan board member, said the central bank might "pre-emptively" withdraw monetary stimulus if trend inflation surpasses 2% for a long time. Technically, we have also observed pivotal signals that may portend the end of the dominant bullish trend and the beginning of a bearish one. Since its October highs (151.95), the pair has now dropped 12%, breaching both the 50 and 200 day moving averages as well as major Fibonacci retracement levels such as 23.6% (142.81) and 38.2% (137.19). The RSI has reached highly oversold levels not seen since March 2020, meaning that the bearish price action was rather violent.  What can we expect from here? A critical support zone is positioned between 130.3 and 132.65. If USD/JPY breaks below 132, it would have retraced 50% of its bullish expansion in 2022, a signal that might confirm the bearish trend reversal. The 130.3 represents the lows from August, which is another technical milestone. The US NFPs from today and the CPI due out on December 13 constitute the bullish risk event for the USD/JPY and might influence the Fed's tone at the FOMC meeting on December 14. Higher-than-expected NFPs or CPI data might rekindle dollar bulls and drive US yields higher on anticipation of a hawkish Fed, resulting in USD/JPY dip buying and a possible retest of 140 levels.
by Capitalcom
1 week after Japanese yen interventionLast Thursday was an incredibly volatile trading session for the USD/JPY. This volatility was largely caused by the Bank of Japan's (BoJ) intervention in the currency markets to defend its depreciating currency, the Japanese Yen. Last week’s move was the first time since 1998 that the BoJ had intervened. There are some parallels between 1998’s intervention and 2022’s. For one, the price level in 1998 was cracking 146.00 when the BoJ stepped in. Before last week’s intervention, the pair was trying to sustain a break above the 145.00 key resistance, almost reaching the 146.00 price level. Where the most recent intervention might diverge is the sustainability of the pair’s downside potential. While last week’s intervention did cause a huge fall in the USD/JPY from 145.90 to 140.35 in one session, it has since found its way back to ~144.00 over the ensuing days. This is because the BoJ’s temporary currency intervention is no match for its unwavering commitment to ultra-low interest rates. Bear in mind that the BoJ may jump back into the currency market at any time to help the yen, and as we have seen, 145.00 is a critical level for the BoJ. Currently, the price for the USDJPY is back on track towards the upside. However, the price is currently contenting with 145.00, a monthly key psychological resistance and an RSI in the 60s. On the other hand, the daily timeframe has a minor candle closure above the 144.50 daily resistance. This closure might indicate a possible continuation of the upside. The current daily candle, however, should have a strong bullish candle close to support this idea. The current candle closing below 144.50 might indicate a consolidation between 144.50 and 142.00 and needs to make an empathic break before we see price make a sustained move in either direction.
by BlackBull_Markets