The yen reached its lowest level since 1990 on Wednesday, prior to exhibiting a modest recovery following a meeting of Japan's highest-ranking monetary officials to discuss the currency's sharp depreciation and signal their preparedness for intervention.
JPY At Record High: History Repeats?
In 2022, Japanese authorities had intervened previously to support the yen at 151.94. Similar sentiments were expressed by Finance Minister Shunichi Suzuki, who cautioned against excessive currency fluctuations and conveyed Japan's preparedness to implement resolute measures.
The yen has depreciated by more than 7 percent this year due to the widening yield disparity between Japanese and U.S. bonds. The Bank of Japan's recent minor interest rate adjustment could not reverse this trend.
The commencement of an interest rate cut cycle by the U.S. Federal Reserve and the subsequent decrease in government bond yields outside of Japan may prove pivotal in halting the yen's long-term depreciation.
What Should Investors Do Now?
In light of robust economic data and cautious statements from central bankers, investors have reevaluated their anticipations of substantial interest rate reductions, which has positioned the dollar for substantial quarterly gains.
As noted by Guy Miller, chief market strategist at Zurich Insurance Group, the strength of the U.S. dollar, which has surpassed expectations in comparison to other regions, exerted pressure on other currencies.
The market is preoccupied this week with U.S. core inflation data that is expected to be released on Good Friday. In spite of this, durable goods orders in the United States increased significantly on Tuesday, which bolstered the dollar and weighed on the yen.
USDJPY Technical Analysis
The USDJPY daily price shows a clear bullish trend, where the recent price consolidates at a multi-year high. In this context, further bullish pressure needs solid confirmation from the current price area.
On the other hand, the central bank's intervention in the forex market could be a crucial indicator in finding a bearish reversal signal in this pair. For this reason, a solid bearish exhaustion at the top could signal a selling opportunity.
In the main chart, the dynamic 20-day EMA is below the current price with a bullish slope, which suggests ongoing buying pressure. In that case, more consolidation with a bullish daily candle above the 151.90 level could extend the buying pressure above the 155.00- 156.00 price area.
The alternative approach is to have an immediate downside pressure with a daily candle below the 150.25 level, which could work as a bearish range breakout, targeting the 147.00 psychological level.
