Fundamental Analysis

• Speculation of foreign exchange intervention by Japanese authorities; a sharp drop from the 150 JPY range to the 147 JPY range.
• After the intervention, it rebounded to the 149 JPY range and transitioned to a range-bound market.
• The Ministry of Finance made no comment regarding the intervention.

USDJPY Technical Analysis

Analyzing the daily chart of the USD/JPY rate, it formed an upward channel and intervention occurred once it exceeded 150 JPY. On October 21, 2022, there was an intervention at 151.950 JPY, which subsequently fell to the 127 JPY range. This marks roughly one year since the last intervention.

If it breaks below the 24-day moving average and the Ichimoku Cloud baseline, there might be a repeat of last year’s movements. As long as U.S. economic indicators remain favorable and the high-interest-rate environment persists, a trend reversal seems challenging. A rise in speculation regarding a policy change by the Bank of Japan might lead to a potential downturn.

The observed volatility is lower than last year. Still, the fact that intervention occurred suggests that authorities might want to avoid levels above 150 JPY.

Day Trading Strategy (Hourly)

Analyzing the daily chart of the USD/JPY rate, it recovered to the 149 JPY range after the sharp decline on the 1-hour chart. Significant wicks can be observed in both directions. The RSI is at 41, with a rebound seen at the 240-day moving average. Since it has penetrated below the Ichimoku Cloud, it’s crucial to see if the cloud acts as a resistance zone. However, aggressive selling should be avoided unless it breaks below the 240-day moving average.

From a fundamental standpoint, the interest rate differential between the U.S. and Japan suggests a trend towards a weaker yen.

For day trading, tentative buying or a wait-and-see approach around 149.50 JPY is recommended. The target is 150.25 JPY, with a stop at 148.850 JPY. Although the possibility of a second intervention is low, setting a stop loss is considered essential.

Support and Resistance Lines

The resistance line to be considered in the future is as follows

148.75 JPY – Rebound price after the intervention.
147.30 JPY – Rebound price immediately after the sharp decline.

Market Sentiment

USDJPY　Sell: 72% Buy: 28%

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*Trading advice in this article is not provided by Milton Markets, but by Shu Fujiyasu Jr., a certified technical analyst.