Hello friends today we will talking about USD/JPY Pair at 24-year highs. It’s simple for speculators to buy into the Fed and BOJ’s glaring contrast in central bank policy.
After the extended Labor Day weekend, which marked the unofficial end of summer, US traders are back at their desks, and they are in for a very busy week.
There are several eagerly awaited central bank meetings this week, including those of the RBA (which increased by 50bps overnight as predicted), BOC, and ECB, as my colleague Joe Perry pointed out in his Week Ahead report.
The biggest moves this week, however, have not been in the currencies affected by these central bank meetings; rather, traders have been concentrating on the USD/JPY, which has so far been the biggest FX trend of 2022.
The BOJ is adamantly committed to easy policy through its yield curve control (YCC) programme, while the Fed continues to raise interest rates aggressively in an effort to control inflation. From a fundamental standpoint, this stark central bank policy divergence between the Fed and BOJ is an easy story for traders to grasp onto.
That basic dynamic should keep driving USD/JPY higher up until or unless the BOJ starts to worry about inflation or the Fed notices the US economy slowing down sufficiently to suspend its rate hikes.
There is now little indication that the fundamental momentum is slowing down, with the 2-year Treasury yield on course to close above 3.50% today, its highest level in 15 years.
Technical view: USD/JPY
In the early half of August, USD/JPY pulled back to consolidate around its 50-day EMA before making a clear breakout above the summer highs just around 140.00. There are currently few historical resistance levels left until the 1998 highs, which begin in the 146.00 region:
The 14-day RSI indicator has been in a positive range (>30) for the whole year and might easily rise even higher before flashing a true danger flag for bulls, despite the fact that it is technically in “overbought” territory over 70. Only a move back below the previous resistance that has now turned into support in the 139.50 region would at this time reverse the near-term bullish technical bias.
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