USD/JPY Analysis and Charts
USD/JPY is close to the 2022’s high of 151.94. This was a 30-year peak. Now the strong US consumer price numbers could lead to a Dollar surge again.
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The Japanese Yen has been struggling against the US Dollar in Europe and Asia on Monday, with USD/JPY poised for a fourth straight day of gains, and closing in on the thirty-year peaks of 2022.
The Japanese unit has been struggling since the Bank of Japan has shown no interest in participating in the global interest-rate hikes, in response to inflation. The BoJ believes that the domestic pricing power is weak and that a response to transient global factors is not required. Moreover, the BoJ disappointed markets at the end of October when it amended a long-held program of yield curve control at its scheduled policy meeting, aiming to keep ten-year local bond yields capped.
Governor Ueda stated that he still hasn’t seen enough evidence to feel confident that trending inflation will sustainably hit two percent, hence the market saw a slump in the Yen.
The US Dollar is within reach of the high point of 2022 at 151.94, a height not seen since the mid-1990s. The market’s focus is now on the ‘USD’ side of the pair, with key official US inflation figures due on Tuesday.
Economists expect that headline consumer price inflation will relax at an annual pace of 3.3% last month, from 3.7% in September. However, the core rate, which strips out the volatile effects of food and fuel prices is expected to have stayed steady at 4.1%.
The Gross Domestic Product figures from Japan are also due long after the European market closes on Tuesday. Although they aren’t expected to draw as much attention as the US data, they are expected to be quite weak. If they are, it will weigh further on the Yen. Recommended by David Cottle Trading Forex News: The Strategy
USD/JPY Technical Analysis
The USD/JPY rate has been climbing consistently since mid-January, when the Dollar’s value rose by an incredible 29 Yen. The most meaningful current upward trend channel on the daily chart starts from early August. The pair is currently closer to the base of the channel, but that may be due to caution as the 2022 top nears, as of 1330 GMT on Tuesday, the pair was at 151.77.
It is highly likely that this week will see a new high made above that level, but it may be more useful to see how comfortable the Dollar looks above that level, such as on a weekly closing basis. Above it, the Dollar bulls will look to challenge the channel top once again. That comes in a good way above the current market at 153.95, a height not seen since the mid-1990s.
Still, as might be expected, the Dollar is starting to look overbought now, if not yet dramatically so. USD/JPY’s Relative Strength Index comes in at 62.1, high, for sure, but still below the 70.00 level which suggests extreme overbuying. Reversals are likely to find near-term support at the channel base, currently 149.71, ahead of November 6’s low of 148.89. Should that lower level give way, the focus would then turn to the first Fibonacci retracement of the entire rise up from January 13’s low. That comes in at 146.16, well below this new week’s market.
IG’s own client sentiment indicator finds fully 85% of traders net short at current levels, a number that might argue for a contrarian long-side play. See How Retail Sentiment Can Affect USD/JPY Price Action.
