USD/JPY FORECAST:
- USD/JPY stabilizes after Tuesday’s pullback triggered by possible FX intervention by the Japanese government.
- The pair maintains a constructive outlook in the near term.
- This article looks at USD/JPY’s pivotal technical levels worth watching this week.
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USD/JPY has displayed a strong bullish trend throughout 2023, surging by over 14% since January. This upward momentum has been driven by the sharp rise in U.S. Treasury yields on account of the Federal Reserve’s hawkish policy stance. Today, the pair remained relatively stable, hovering around the 149.00 handle, following a modest pullback on Tuesday, which traders speculated was due to possible FX intervention by the Japanese government.
While Tokyo has neither affirmed nor refuted its involvement in bolstering the yen earlier in the week, it’s evident from the price action that any artificial intervention won’t significantly or durably change the currency’s devaluation trend. Overall, as long as the substantial gap in monetary policy between the Fed and the Bank of Japan persists, the yen will maintain its bearish bias. This could mean further gains for USD/JPY in the coming weeks.
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Looking at the bigger picture, Tokyo has few options to counter U.S. dollar strength for now, with U.S. rates soaring to multi-year highs and Japanese yields capped by the BoJ. To illustrate the current disparity, the U.S. 10-year government note is currently trading above 4.7%, while the Japanese security with the same maturity remains stuck around 0.75%. This dynamic undoubtedly benefits the greenback.
From a technical perspective, USD/JPY remains entrenched within an indisputable uptrend. That said, if the pair manages to hold above support at 148.80, the bulls may reload, setting the stage for a possible rally above 150.00, towards the upper boundary of an ascending medium-term channel at 151.25. On further strength, attention turns to 151.95.
Conversely, in the event that the bears unexpectedly reestablish dominance over the market, initial support emerges at 148.80, as shown in the daily chart below. Moving lower, the focus squarely shifts to 147.25, with 146.00 emerging as the subsequent downside area of interest.
Explore the impact of crowd mentality on FX trading dynamics. Obtain our sentiment guide to decipher how the positioning in USD/JPY can serve as a compass for the pair’s path ahead!
| Change in | Longs | Shorts | OI |
| Daily | 20% | 2% | 4% |
| Weekly | -15% | 2% | -1% |