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USD/JPY Analysis and Charts

  • USD/JPY trades cautiously above the 150.00 mark.
  • Risk aversion has offered the Dollar some broad support.
  • Expect more focus on the possibility of intervention in the market as the recent highs approach.

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The Japanese Yen is higher against the United States Dollar on Tuesday but only barely. The week got off to a thinly traded start thanks to the Presidents’ Day holiday in the US and isn’t replete with the sort of first-tier data likely to offer huge trading cues.

The Dollar seems to have benefitted from a bit of risk aversion in a trading environment weighed down by gloomy geopolitical stories from Ukraine to Gaza. The minutes from the January 1 monetary policy meeting at the Federal Reserve will hog the limelight on Wednesday. However, they are likely to be a little historic for markets. Strong US inflation numbers released since have already seen bets as to when rates might fall pushed back, with the market now looking at June or July rather than May.

For the ‘Yen side’ of USD/JPY, Japanese trade numbers are due for release early on Wednesday local time (very late Tuesday in London) and, with Japan having slipped surprisingly into technical recession at the end of last year, maybe more closely watched than usual by currency traders.

With USD/JPY closing back in on November’s highs, it’s perhaps notable that Japanese Finance Ministry official Atsushi Mimura said on Tuesday that Tokyo is constantly communicating with international partners regarding intervention in the market. While Japanese officials have mulled the pros and cons of a weak Yen at various times, Tokyo has been one of the more active movers in the past if it thinks that the market is getting too far away from realistic valuations. Expect more focus on this issue if USD/JPY continues to rise.

USD/JPY Technical Analysis

USD/JPY Daily Chart Compiled Using TradingView

USD/JPY is in the middle of a quite well-respected uptrend band which has been in place since January 3. That band now offers support at 148.564, ahead of an important retracement prop down at 146.118. That level looks pretty solid though, having most recently held firm when tested in late January.

Resistance comes in at February 13’s high of 150.795, ahead of November 13’s multi-decade peak of 151.594. Above that the uptrend channel offers resistance at 153.75, but that’s a long way above the market and isn’t likely to come into play anytime soon.

Traders seem understandably nervous about the Dollar’s ability to make substantial further gains from here. More than 70% of traders at IG are coming at USD/JPY from the short side now. This is usually the sort of level that might argue for a contrarian long position but, given the likely rising chance that the Japanese authorities are watching developments closely, that might not make much sense from a risk/reward perspective.

of clients are net long.

of clients are net short.

Change in Longs Shorts OI
Daily 0% -1% -1%
Weekly 17% -2% 3%

–By David Cottle for DailyFX


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