The USD/JPY pair is once again testing the 150.00 level amid a stronger US dollar. This is far from the first attempt to breach this elusive price barrier, which plays a big role. Traders find themselves caught between a rock and a hard place. On one hand, there are no other options for USD/JPY bulls but to challenge the 150.00 level. The yen remains vulnerable, and the greenback continues to be in demand, despite its broad weakness across the market. You could say that the USD/JPY pair has its own atmosphere, its own ecosystem, allowing dollar bulls to feel confident even in challenging times. Hence, any kind of growth from the dollar leads to an attack on the 150.00 mark. It seems that this target no longer serves as a “red line” for the Japanese government. According to some experts, the stop signal is now located a bit higher, around the 151.00 level.
To recap, last year Japanese officials conducted several rounds of currency intervention. Initially, in September, when the price reached the 146.00 level, the authorities decided to take action. However, the market responded formally – literally the next day, the bulls returned to their previous positions, from which they were “driven away.” Moreover, sensing the weakness, so to speak, buyers rallied another 600 points higher, reaching 151.96. It was at this point that Japan’s Ministry of Finance made a massive move in October 2022, spending a record 6.35 trillion yen (approximately 43 billion dollars) on currency interventions. Up until that point, the record amount for selling dollars and buying Japanese currency had been 2.84 trillion yen (about 19 billion dollars). It’s noteworthy that the currency intervention was not officially announced, but its consequences were quite significant: the USD/JPY pair dropped by two thousand points in a matter of weeks, and then another thousand points.
This year, a similar situation is developing. In early October, the Japanese government, according to rumors, conducted a currency intervention when the price tested the 150.00 level. The pair reacted with a sharp decline. However, initially, the price only dropped by 300 points, and secondly, it returned to the vicinity of the 150.00 level just a few weeks later. Now market participants are testing the Japanese authorities’ patience and periodically probing this “forbidden price territory.”
However, as mentioned earlier, the bulls have no choice – it’s either sideways movement or an upward push. Rare price declines, which are mostly due to the greenback’s weakness, are seen as opportunities to open long positions. So traders are forced to take the risk and test the 150.00 price level.
In a sense, this risk is justified – it seems that the bulls have managed to move the “red line” higher, thereby securing the 150.00 level for themselves (or creating the illusion of safety). Recent events have shown that Japanese authorities are willing to maintain their patience even when traders “push too far.”
Recall that the bulls marked their presence at 151.73 on the last day of October, reacting to the conflicting outcomes of the Bank of Japan’s meeting. On the one hand, the BOJ decided to adopt a more flexible approach to fluctuations in the yield of 10-year government bonds. According to the decision, the central bank will consider the “1.0%” target not as a strict limit for JGB yield but rather as a reference point. On the other hand, the central bank indicated that it is ready to continue patiently implementing its accommodative monetary policy “to support economic activity and create conditions for more active wage growth.”
Considering the hawkish expectations that prevailed in the market in the run-up to the October meeting (hints of a possible move away from negative rates in 2024), the meeting’s outcome was interpreted as a negative factor for the Japanese yen. The USD/JPY pair jumped to the 151.00 level without paying much attention to existing risks. The disappointing U.S. Non-Farm Payrolls data brought the yen back to the 149.00 level.
At the moment, the bulls have taken the initiative again and pushed beyond the 150.00 mark. It’s worth noting that during October, bullish momentums faded upon approaching this target. Now buyers have grown bolder and are persistently testing the 150.00 level. In this case, one can again draw an analogy with the previous year, assuming that the “red line” is now located slightly higher, around the 151.00 level. It’s important to note that the nearest and strongest resistance level is situated at 151.30 (the upper Bollinger Bands line on the daily chart). Although the bulls recently pushed higher (151.70), it is still advisable to lock in long positions at the 151.30 level. Beyond that is a zone of increased risk.
The material has been provided by InstaForex Company – www.instaforex.com
The USD/JPY pair is once again testing the 150.00 level amid a stronger US dollar. This is far from the first attempt to breach this elusive price barrier, which plays a big role. Traders find themselves caught between a rock and a hard place. On one hand, there are no other options for USD/JPY bulls but to challenge the 150.00 level. The yen remains vulnerable, and the greenback continues to be in demand, despite its broad weakness across the market. You could say that the USD/JPY pair has its own atmosphere, its own ecosystem, allowing dollar bulls to feel confident even in challenging times. Hence, any kind of growth from the dollar leads to an attack on the 150.00 mark. It seems that this target no longer serves as a “red line” for the Japanese government. According to some experts, the stop signal is now located a bit higher, around the 151.00 level.
To recap, last year Japanese officials conducted several rounds of currency intervention. Initially, in September, when the price reached the 146.00 level, the authorities decided to take action. However, the market responded formally – literally the next day, the bulls returned to their previous positions, from which they were “driven away.” Moreover, sensing the weakness, so to speak, buyers rallied another 600 points higher, reaching 151.96. It was at this point that Japan’s Ministry of Finance made a massive move in October 2022, spending a record 6.35 trillion yen (approximately 43 billion dollars) on currency interventions. Up until that point, the record amount for selling dollars and buying Japanese currency had been 2.84 trillion yen (about 19 billion dollars). It’s noteworthy that the currency intervention was not officially announced, but its consequences were quite significant: the USD/JPY pair dropped by two thousand points in a matter of weeks, and then another thousand points.
This year, a similar situation is developing. In early October, the Japanese government, according to rumors, conducted a currency intervention when the price tested the 150.00 level. The pair reacted with a sharp decline. However, initially, the price only dropped by 300 points, and secondly, it returned to the vicinity of the 150.00 level just a few weeks later. Now market participants are testing the Japanese authorities’ patience and periodically probing this “forbidden price territory.”
However, as mentioned earlier, the bulls have no choice – it’s either sideways movement or an upward push. Rare price declines, which are mostly due to the greenback’s weakness, are seen as opportunities to open long positions. So traders are forced to take the risk and test the 150.00 price level.
In a sense, this risk is justified – it seems that the bulls have managed to move the “red line” higher, thereby securing the 150.00 level for themselves (or creating the illusion of safety). Recent events have shown that Japanese authorities are willing to maintain their patience even when traders “push too far.”
Recall that the bulls marked their presence at 151.73 on the last day of October, reacting to the conflicting outcomes of the Bank of Japan’s meeting. On the one hand, the BOJ decided to adopt a more flexible approach to fluctuations in the yield of 10-year government bonds. According to the decision, the central bank will consider the “1.0%” target not as a strict limit for JGB yield but rather as a reference point. On the other hand, the central bank indicated that it is ready to continue patiently implementing its accommodative monetary policy “to support economic activity and create conditions for more active wage growth.”
Considering the hawkish expectations that prevailed in the market in the run-up to the October meeting (hints of a possible move away from negative rates in 2024), the meeting’s outcome was interpreted as a negative factor for the Japanese yen. The USD/JPY pair jumped to the 151.00 level without paying much attention to existing risks. The disappointing U.S. Non-Farm Payrolls data brought the yen back to the 149.00 level.
At the moment, the bulls have taken the initiative again and pushed beyond the 150.00 mark. It’s worth noting that during October, bullish momentums faded upon approaching this target. Now buyers have grown bolder and are persistently testing the 150.00 level. In this case, one can again draw an analogy with the previous year, assuming that the “red line” is now located slightly higher, around the 151.00 level. It’s important to note that the nearest and strongest resistance level is situated at 151.30 (the upper Bollinger Bands line on the daily chart). Although the bulls recently pushed higher (151.70), it is still advisable to lock in long positions at the 151.30 level. Beyond that is a zone of increased risk.
The material has been provided by InstaForex Company – www.instaforex.com
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