Exploring All Options to Address Excessive Exchange Rate Volatility

Forex

Central Bank

Summary:

The yen continues its depreciation, with the USDJPY reaching the 153 level, hitting a new high since June 1990. Some institutions see the 153 level as a key point for Japanese authorities to intervene.

SELL USDJPY

Close Time

CLOSED

154.900

Entry Price

135.000

158.890

154.782 -0.420 -0.27%

2.0

Pips

Profit

135.000

154.880

Exit Price

154.900

Entry Price

158.890

Fundamentals

Overnight, the US inflation data for March surged, pushing the USDJPY above the 152.00 level and reaching as high as 153.00, the highest level since 1990, sparking concerns about potential currency intervention.

However, responses from key officials today indicate that more cautious approaches are currently under consideration. In particular, Finance Minister Shunichi Suzuki acknowledged the complexity of the impact of yen depreciation, highlighting both advantages and disadvantages. It appears that Japan is not yet prepared for direct intervention.

Suzuki emphasized that the government is closely monitoring the currency market with "a sense of urgency." However, he also stressed that Japan is "not just looking at (USDJPY) levels themselves such as 152 yen or 153 yen (per dollar) but also analyzing their background." Suzuki reiterated the importance of currency stability, emphasizing that exchange rates should reflect economic fundamentals rather than short-term fluctuations.

Japan's Chief Currency Diplomat, Masato Kanda, echoed this sentiment, emphasizing the "rapid" recent movements of the yen. While Kanda did not dismiss intervention measures, he pointed out the lack of fixed levels to trigger such actions. "I don't have any particular (USDJPY) level in mind," he mentioned.

Encouraged by Finance Minister Shunichi Suzuki's remarks that excessive yen volatility is undesirable, the yen weakened further against other G10 and Asian currencies after strengthening in early trading.

If the situation becomes chaotic now, Japanese authorities may continue to use strong rhetoric and intervene. An intriguing factor is how the Bank of Japan will ultimately handle the issue; we may see the Bank of Japan taking a more aggressive stance, which could become a catalyst for a more sustained reversal.

Exploring All Options to Address Excessive Exchange Rate Volatility_1

Technical Analysis

Following higher-than-expected US inflation data, the USDJPY surged above the 153.00 level, with an intraday gain of 1%; this propelled the price into a significantly overbought condition in the larger timeframe, warning speculators to exercise caution. However, the market remains cautious about the possibility of Japanese authorities intervening to support the yen, although Japan seems not in a hurry to find the best timing for intervention.

If bullish pressure persists, the price may test the 34-year high resistance at 153.32. A breakout above this area could lead to further upside momentum, encountering resistance at 154.65. Further upside potential may halt around 155.80.

On the other hand, if the asset experiences a pullback, the recent support level at 150.87 may serve as the first obstacle for bears to overcome. Even lower, strong support may be found around 149.40. A breakthrough of this level could pave the way for a decline towards 147.44.

Overall, the market continues to test the determination of the Bank of Japan, and careful consideration is needed to address whether this oscillation will trigger a downward correction.

Trading Recommendations

Trading Direction: Short

Entry Price: 154.90

Target Price: 135.00

Stop Loss: 156.89

Valid Until: 2024-04-25 23:55:00

Support: 152.76, 152.00, 151.00, 150.00

Resistance: 153.50, 154.66, 155.00, 155.75

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