USD/JPY Analysis: Rate Stabilizes After Tsunami

Less than a month ago, the rate was above 161 yen per US dollar. This week, it dropped below 142.5 yen (approximately -12%).

The strengthening of the Japanese yen was driven by actions from the Bank of Japan and financial authorities:

→ Intervention to support the yen in mid-July;

→ An interest rate hike last week.

On its downward trajectory, the USD/JPY rate broke through:

→ The ascending trendline (shown in purple);

→ The median line of a large ascending channel (shown in blue) that began in 2023;

→ The psychological levels of 160 and 150 yen per dollar.

The bears’ aggression seems to have exhausted near the lower boundary of the blue channel. This was aided by statements from authorities aimed at stabilising financial markets, including the Japanese stock market.

Specifically, Bank of Japan Deputy Governor Shinichi Uchida said: “I believe that the bank needs to maintain monetary easing with the current policy interest rate for the time being, with developments in financial and capital markets at home and abroad being extremely volatile.” He also noted that concerns about the US economy, combined with actions from the Bank of Japan, triggered the volatility.

Technical analysis of the USD/JPY chart shows that:

→ Following the “dovish” comments from authorities, the price returned within the blue channel, and the RSI is recovering after falling below the 15 level.

→ If the bears resume pressure, support may come from both the lower boundary of the channel and the December 2023 lows around 141 yen per dollar.

→ Resistance can be expected at the psychological level of 150 yen per dollar, where the bears proved their strength after brief fluctuations around this level at the start of the week.

It is possible that, following the volatility “tsunami,” the market’s turbulence will subside, and the forces of supply and demand will more accurately indicate the fair value of the yen relative to the US dollar in light of the latest news.

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