Fundamental Analysis

• US CPI Falls Below Expectations, Leading to USD Selling, Major Volatility in Forex Market
• USDJPY Plummets from 161 JPY to 157 JPY, Reports of Forex Intervention Surface
• Rising Expectations of US Rate Cuts Lead to Prominent USD Selling, Buying Dips in Cross-Yen Pairs

USDJPY technical analysis

USDJPY plunged from the 161 JPY range to the 157 JPY range. There are reports suggesting forex intervention, generating significant interest. The only way to confirm actual intervention is through the Bank of Japan’s foreign reserves data, which will be published at the end of the month. Even if intervention occurred, it is likely to be on a small scale.

However, looking at the daily chart, the pair is moving within a channel and rebounded at the 52-day moving average, indicating technical factors are also at play. Despite significant fluctuations, there is skepticism about the intervention.

The future focus will be whether the pair breaks below the 52-day moving average or falls out of the channel.

If it breaks below the channel, there is a possibility of a trend reversal towards JPY appreciation in anticipation of US rate cuts.

Day trading strategy (1 hour)

The hourly chart reveals significant USD selling in the forex market. However, a large hammer candlestick suggests strong buying interest on dips. Currently trading in the 159 JPY range, a drop below 157.40 JPY might indicate a shift towards JPY appreciation.

On the other hand, if the pair aims for 160 JPY again from the 159 JPY range, it might resume its trend towards JPY depreciation.

The day trading strategy is challenging, but given the weak US CPI and the growing expectations of a Bank of Japan rate hike, there is likely to be a correction. Therefore, the strategy is to sell on rebounds. Sell around 160.35 JPY and close at 159 JPY, with a stop at 160.50 JPY.

Support/Resistance lines

The following support and resistance lines should be considered moving forward:

158.15 JPY – 52-day moving average

Market Sentiment

USDJPY: Sell: 52% Buy: 48%

Featured Currency Pair of the Week (AUDJPY)

Due to the sharp drop in USDJPY, AUDJPY also plummeted from the 109 JPY range to the 107 JPY range. There are views that forex intervention coincided with the rising expectations of rate cuts, while others believe no intervention took place. This can only be confirmed with the Bank of Japan’s foreign reserves data at the end of the month.

In any case, it is clear that the upward trend of the Australian dollar has been halted.

Drawing a Fibonacci retracement, the pair rebounded at 38.2%. The RSI also plummeted to 62, and it remains to be seen whether there will be buying interest on dips.

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