USD/JPY update
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USD/JPY was holding up pretty well until Thursday when the June CPI data came in lower than expected. The Bank of Japan’s (BoJ) continuous dovish policy has meant the Japanese currency has been heavily sold against most majors as the carry trade has played against it. Even intervention in currency markets from Japanese officials has not been able to halt the devaluation of the yen over the past year, with the focus firmly on the BoJ as the only one who can stop it.
That said, markets have been cautious when trading around specific levels as the threat of intervention has limited the upside at times. The last time it happened was in April at the 160 level. For the past few weeks, buyers have been testing the appetite to push higher and have managed to break 160 without triggering another round of intervention, but the bullish momentum had started to fizzle out. Thursday’s data was the catalyst for that momentum to change and USD/JPY slipped back to its 50-day SMA currently at 157.83. This allowed the RSI to reset the overbought conditions, which could allow new buyers to come in.
Despite the recent weakness in the dollar, there is no real appetite to be a yen buyer right now, as Japanese policy continues to undermine the currency. Until we see decisive action from the BoJ to raise its policy rate it is likely that USD/JPY will keep its bullish bias. For now, buyers seem to be interested in keeping the pair above 158.
That said, markets have been cautious when trading around specific levels as the threat of intervention has limited the upside at times. The last time it happened was in April at the 160 level. For the past few weeks, buyers have been testing the appetite to push higher and have managed to break 160 without triggering another round of intervention, but the bullish momentum had started to fizzle out. Thursday’s data was the catalyst for that momentum to change and USD/JPY slipped back to its 50-day SMA currently at 157.83. This allowed the RSI to reset the overbought conditions, which could allow new buyers to come in.
Despite the recent weakness in the dollar, there is no real appetite to be a yen buyer right now, as Japanese policy continues to undermine the currency. Until we see decisive action from the BoJ to raise its policy rate it is likely that USD/JPY will keep its bullish bias. For now, buyers seem to be interested in keeping the pair above 158.
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