USD/JPY forecast as odds of Japan currency intervention rise

June 29, 2023 07:33 PM AEST | By Invezz

USD/JPY forecast as odds of Japan currency intervention rise — Image source: Invezz

Bank of Japan tightening

The Japanese economy is doing well. Its stock market has become one of the best-performing in the world. Its key indices like Topix and the Nikkei 225 have surged to the highest level in over three decades as foreign investors pile in.

Additional data shows that the economy is bouncing back. Numbers published on Thursday showed that retail sales jumped by 5.7% in May after rising by 5.15 in the previous month. It was the 15th straight month of growth in the retail sector as tourism boomed. Retail sales rose by 1.3% on a month-on-month basis.

Further data showed that the country’s household confidence improved to 36.2 from the previous 36. This is an important number since consumer spending is an important component of the Japanese economy.

There are signs that the Bank of Japan will start tightening in the near term. In a statement on Wednesday, Kazuo Ueda, the new BoJ governor, said that the bank could start normalizing policy in the near term if it becomes confident that inflation will rise in 2024. Inflation remains below 2% but it has been rising.

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The USD/JPY pair also jumped after signs that the government will intervene if the currency continues falling. In a statement, the finance minister said that the government was watching the currency closely.

In another statement, Masanda Kato, the country’s currency diplomat said that the government would not rule out interventions. Last year, the government sold over $65 billion of foreign reserves when the USD to JPY exchange rate jumped to 150. A weaker Japanese yen hurts many companies that depend on imports.

USD/JPY technical analysis

USD/JPY chart by TradingView

The USD/JPY price has been in a strong bullish trend in the past few months. It started the year at 126 and has now risen to 144. Most recently, the pair moved above the important resistance level at 138, the highest level on March 7th. It has moved above the 50-day moving average.

At the same time, oscillators like the Relative Strenth Index (RSI), Stochastic Oscillator, and the MACD have moved to the overbought level. Therefore, there is a likelihood that the pair will retest the support at 138.76 as hopes of interventions rise.

The post USD/JPY forecast as odds of Japan currency intervention rise appeared first on Invezz.

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