The USD/JPY exchange rate has been steadily climbing towards the significant milestone of 155 yen per US dollar, a level not seen since 1990.
With the Japanese currency already depreciating by approximately 9% against the dollar this year, momentum is building in favour of further gains.
This upward trajectory is bolstered by Jerome Powell’s recent remarks hinting at prolonged high US interest rates, dashing hopes of imminent rate cuts. Consequently, market expectations for rate easing have dwindled to a modest 40 basis points for 2024, down from the initial 160 basis points anticipated at the start of the year, according to FedWatch.
Meanwhile, attention is riveted on potential intervention by Japanese monetary authorities to stem the yen’s rapid depreciation. While officials have signalled readiness to act, analysts caution that curbing the dollar’s bullish momentum would be challenging and costly. Japanese Finance Minister Shunichi Suzuki underscored vigilance regarding the yen’s exchange rate against the US dollar, pledging responsive measures as needed.
Kenneth Broux, head of exchange rate research at Societe Generale, underscored the limited impact of intervention in the current market climate, noting that it could merely temper depreciation rather than reverse the trend. Japan’s last intervention in 2022, which amounted to an estimated USD 60 billion, underscores the magnitude of the challenge.
A technical analysis of the USD/JPY chart reveals:
- The market is entrenched in an uptrend, as evidenced by the Awesome indicator’s position above the zero line.
- Long lower shadows on the candles indicate robust demand.
- Construction of the ascending trend channel, based on consolidation zones A and B and the March minimum, suggests a target of 156 yen per US dollar.
- Former resistance at 153.400 may serve as a support level in the event of a pullback.
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