Better to Buy USDJPY as Yen Has Plunged Over 190 Points

Summary:

The yen's recent strength has been driven by various factors, so there is a potential rebound following its sharp decline.

BUY USDJPY

Close Time

CLOSED

149.419

Entry Price

151.894

147.730

159.879 -0.049 -0.03%

168.9

Pips

Loss

147.730

147.729

Exit Price

149.419

Entry Price

151.894

Fundamentals

The Bank of Japan (BOJ) unexpectedly raised interest rates by 15 basis points in its latest policy meeting. The market reaction was muted at first, but the USD/JPY pair began to be volatile soon, with swings reaching up to 220 points. The pair fell by over 360 points, currently trading around 150.152.

This outcome was surprising but also anticipated. It was surprising because the market broadly anticipated the BOJ to hold rates steady. Yet, it was expected because major outlets like NHK, Nikkei, and Jiji Press had reported that the BOJ was considering a rate hike. Notably, the rate decision announcement was delayed by nearly an hour, longer than usual under Governor Kazuo Ueda, suggesting significant deliberations. During this time, the BOJ website experienced heavy traffic, likely from investors seeking clues.

Following the announcement of a 15bp rate increase, the USD/JPY pair plummeted. However, this sharp decline was caused by more than just the BOJ rate decision.

Before the rate decision announcement, Japan's new top currency diplomat Atsushi Mimura stated that the recent yen weakness was more harmful than beneficial to Japan's economy and hinted at potential intervention to curb speculative behavior.

Additionally, geopolitical tensions added to the yen's volatility. Israel conducted a targeted strike on the southern suburbs of Beirut, killing Hezbollah commander Fuad Shukr. Israel blamed this commander for a recent attack on Majdal Shams in the Israel-occupied Golan Heights. Furthermore, Hamas leader Ismail Haniyeh was killed, a significant blow to the organization but not unprecedented, suggesting continued conflict.

The yen's drop likely involved Japanese government intervention and risk-aversion resulting from geopolitical tensions. The extent of each factor's influence is unknown, making shorting the yen risky.

The current 0.25% interest rate just indicates a reduction in monetary easing rather than a shift to tightening. Such a rate is relatively low in Japan's current economic situation. Another rate hike is unlikely until year-end or early next year. Therefore, the impact of this hike on the yen might be limited, leaving room for a USD/JPY rebound.

Technical Analysis

In the daily chart, USD/JPY has reached the upper boundary of the descending channel, a critical point previously broken during the pair's rally. If the price falls below this line again, USD/JPY could drop further to 146.618. Conversely, a rebound is possible. A break above 151.894 would signal a halt to the decline.

The Ichimoku Cloud shows the baseline and conversion line in a clear downtrend, with the price significantly distant from the two, indicating strong but diminishing bearish momentum. A short-term long position may be considered.

Better to Buy USDJPY as Yen Has Plunged Over 190 Points_1

Trading Recommendations

Trading Direction: Buy

Entry Price: 149.419

Target Price: 151.894

Stop Loss: 147.730

Support: 149.419, 146.280

Resistance: 151.894, 157.683

Risk Warnings and Disclaimers

You understand and acknowledge that there is a high degree of risk involved in trading. Following any strategies or investment methods may lead to potential losses. The content on the site is provided by our contributors and analysts for information purposes only. You are solely responsible for determining whether any trading assets, securities, strategy, or any other product is suitable for investing based on your own investment objectives and financial situation.

Risk Disclosure

The risk of loss in trading financial instruments such as stocks, FX, commodities, futures, bonds, ETFs and crypto can be substantial. You may sustain a total loss of the funds that you deposit with your broker. Therefore, you should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources.

No decision to invest should be made without thoroughly conducting due diligence by yourself or consulting with your financial advisors. Our web content might not suit you since we don't know your financial conditions and investment needs. Our financial information might have latency or contain inaccuracy, so you should be fully responsible for any of your trading and investment decisions. The company will not be responsible for your capital loss.

Without getting permission from the website, you are not allowed to copy the website's graphics, texts, or trademarks. Intellectual property rights in the content or data incorporated into this website belong to its providers and exchange merchants.

Recent Searches

Top Searches

Markets

Analysis

User

24/7

Economic Calendar

Education

Data