Next week, markets await the Bank of Japan’s policy rate, monetary policy statement, and press conference, market participants are speculating whether the BOJ will raise interest rates for the first time since 2007. Last week, the Yen appreciated by 1.85% against the Euro, as EURJPY dropped from a high of 163.56 to a low of 160.57 as rate speculation began. BOJ decisions can be unpredictable; some government officials and a few BOJ members favor rate hikes as wages improve, while others suggest waiting for more clarity. Either way, a BOJ move can potentially be either in March or April meeting. Other than a few spikes, Inflation in Japan has been steadily rising since 2009; Japan’s m/m inflation Rate currently stands at 2.2%.
Weekly chart
Price trading within an ascending channel (Red lines) began early in March 2022, shortly before the FOMC and ECB started raising interest rates on their respective currencies. Price is currently trading near the channel’s mid-range ahead of US CPI.
Last week, a bearish engulfing candle formation closed below the monthly pivot point of 161.29. Price action also closed below its EMA9 and MA9. This week’s candle is trading mid-range, reflecting indecision; however, we are still early in the week and have four more trading days.
RSI and MACD reflect negative divergences as price action makes higher highs while both indicators make lower highs.
The COT report for the week ending March 8th, 2024 (including data up to the end of the day on Tuesday, March 5th, 2024) shows that Commercial positioning level for the Japanese Yen is almost at its all-time highs, reflecting a potential change in sentiment.
8–Hour chart
A closer look at shorter time frames shows Price action breaking (Yellow circle) below an intermediate trendline (Green line). The break was followed by two pullback attempts, where price action failed to break back above the line. A third pullback was attempted, but it resulted in a shortfall.
Price action has failed to break above the weekly and monthly pivots within the range of 161.29 – 161.64. The level is currently acting as resistance. A break and a close above the range and the broken trend line are required to validate any upside price action.
