This week has raised alarm bells for USD/JPY market participants who are trading the bullish momentum that has been going on since early 2024 (shown in the blue curved lines on the USD/JPY chart):
→ Vice Finance Minister Masato Kanda warned against “excessive volatility” in currency markets, hinting that the yen had weakened too much.
→ Bank of Japan board member Hajime Takata said that, in his opinion, there are prospects for achieving the inflation target of 2%, which opens the way to abandoning negative rates. Note that today there was news on inflation in Japan, which showed that it is slowing down. Thus, BOJ Core CPI in annual terms was 2.6%, a month ago = 2.6%, 2 months ago = 2.7%, 3 months ago = 3.0%.
Statements from officials should increase the likelihood of a rate hike at the Bank of Japan’s March meeting, thereby changing the prevailing sentiment.
Reuters writes that positions against the yen are at a record high, and their collapse could lead to the fact that the 2-month bullish trajectory of the USD/JPY price will be broken.
Wherein:
→ the psychological level factor of 150 yen per US dollar operates in the market — history shows that the fall of the yen below this level leads to a reaction from the Japanese financial authorities.
→ The USD/JPY price may fall to the support zone, which is formed by the level 148.50 (50% of the A→B impulse) and the level 148.8 (former resistance).
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