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Yen plummets to 34-Year Low! Will the Bank of Japan intervene as USD/JPY past 155?

usdjpy analysis, forex trading

Today, the USD/JPY exchange rate has reached unprecedented levels, setting new 34-year highs by crossing 155 yen per US dollar. The decline in the Japanese yen can be attributed to market anticipations of the forthcoming monetary policy decision from Japan's central bank. Market participants are forecasting that the interest rates will remain steady at 0.1%, given the conservative approach of the Japanese monetary policy that tends not to favor abrupt changes.

This conservative stance is largely skeptical about implementing any drastic measures that could potentially bolster the yen's value. Thus, the breaching of the 155.00 level against the USD has initiated a quicker upward trend, with analysts looking towards the next significant resistance point on the forex charts at 160.35. The possibility of intervention by the Bank of Japan (BoJ) looms, should the yen's depreciation continue at this pace.

Currently, the USD/JPY pair is trading around these 34-year highs, staying robustly above 155 yen per dollar. This has spurred a considerable amount of excitement among investors who are keenly awaiting the economic indicators due to be released this Friday. These indicators are expected to provide deeper insights into the economic conditions prevailing in the United States and potentially influence future movements in the currency exchange rates.'

This coming Friday is particularly significant as it will witness the release of the preliminary Consumer Price Index (CPI) data, which acts as a barometer for inflation and generally reflects the economic health of a nation. This data is crucial as it will shed light on the inflation trends in the United States, which in turn could provide vital clues about the future monetary policy directions of the U.S. Federal Reserve.

During its March meeting, the Bank of Japan opted for a slight adjustment in interest rates, marking its first increase since 2007. The rates were tweaked from -0.1% to a range between 0-0.1%. While this was a historic move, the market perceived it as merely symbolic rather than indicative of a shift towards a tightening monetary stance. Consequently, there are strong expectations that during its upcoming meeting, the bank will maintain the interest rates at this slightly elevated but still minimal level. This expectation is also supported by predictions that the CPI, a key indicator of consumer price inflation, will demonstrate a slowing of internal demand within Japan.

The economic analysis by Morgan Stanley economists Takeshi Yamaguchi and Masayuki Inui highlights a specific risk that Tokyo's CPI in April might significantly decrease. This expected drop is largely due to a unique adjustment in how educational costs are calculated, specifically the removal of high school tuition fees in Tokyo. The removal of these fees is part of a broader attempt to reflect the economic impact of offering free high school education in the city's inflation data.

Currently, economists predict that these changes will result in a slowdown of the inflation rate in Tokyo to 2.2% in April, down from 2.4% in the previous month, reflecting broader economic trends and the effectiveness of policy adjustments.

Despite the persistent warnings from Japanese officials about the potential for significant currency interventions, which could be the most substantial in decades if the yen continues to weaken, the Japanese currency is still underperforming compared to others in the Forex market. The recent surge through the 155.00 level has provided the momentum for a strong upward trend. While current daily indicators suggest that the market is overbought, implying that a pullback could be imminent, the overall upward trajectory of USD/JPY remains robust.

Historically, when viewing long-term charts, the importance of levels like the 160.25 seen in February 1990 becomes evident. Despite such historical peaks, the relevance of these levels can diminish over time, as illustrated by the market's disregard for the March 1998 peak at 147.53 during the 2022-24 period.

usdjpy analysis, forex trading
USD/JPY daily chart, MetaTrader, 25.04.2024



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