USD/JPY ANALYSIS

• Key Japanese officials reiterated cautious approach.
• Japan’s inflation report will be the focal point for the pair next week.
• 50-day MA break could spark USD/JPY decline.

JAPANESE YEN FUNDAMENTAL BACKDROP

The Japanese Yen remains vulnerable to further downside due to recent comments from the Bank of Japan (BOJ) Governor Ueda and Japan’s Minister of Finance Akazawa. Some of their statements are shown below:

Ueda:

“We will consider ending YCC and negative rate if we can expect inflation to stably and sustainably hit price our target.”

“Making strong comments now on how we could alter policy could have unintended consequences in markets.”

“We can't say now when the BoJ will change ultra-easy policy.”

Akazawa:

“We don't have a specific forex level in mind in deciding when to intervene.”

“Any FX intervention will be aimed at arresting excess volatility. We won't intervene just because the yen is weakening.“

The above messaging highlights Japan’s careful mindset with so many moving parts globally including the Federal Reserve’s outlook, geopolitical tensions in the Middle East and China’s economic growth. The BoJ will need to incorporate these multiple variables of which many are uncertain before looking to adapt their own monetary policy.

Next week holds some key economic data (refer to calendar below) and with US durable goods orders likely to take a negative turn, the greenback may come under pressure. From a USD/JPY perspective, Japanese inflation will be key due to its significance in determining BoJ policy going forward. The BoJ has frequently reinforced the fact that they need to see inflation consistently above the 2% target rate before looking to alter policy, and with forecasts scheduled to push higher, this may stoke easing policy measures from the central bank.

TECHNICAL ANALYSIS

USD/JPY DAILY CHART

Chart prepared by Warren Venketas, IG

USD/JPY shows price action finding support off the 50-day moving average (yellow)and below the psychological 150.00 handle. Bears will be looking for a confirmation close below the moving average which could open up more downside. Bearish/negative divergence shown via the Relative Strength Index (RSI) may supplement this outlook but with Japanese fundamentals looking less supportive for the Yen, weak US data may be needed to catalyze this move.

Key resistance levels:

• 151.95
• 150.00

Key support levels:

• 50-day MA
• 148.16
• 147.37
• 145.91
• 145.00

IG CLIENT SENTIMENT: BEARISH

IGCS shows retail traders are currently net SHORT on USD/JPY, with 79% of traders currently holding short positions (as of this writing).

https://www.dailyfx.com/news/forex-jpy-weekly-forecast-cautious-ueda-leaves-yen-exposed-wv-20231118.html