- Summary:
- USDJPY traded lower on Monday amid speculation over possible intervention by the BoJ and falling US dollar strength.
USDJPY traded lower on Monday as the market readjusted itself to the possibility of an intervention by the Bank of Japan. The BoJ recently raised interest rates for the first time since 2007, but the yen came close to touching the 152 mark that prompted intervention in 2022. Having said that, the subsidence by USDJPY is not entirely attributable to the possible intervention by BoJ, but a weakening of the US dollar across the board against other currencies.
The DXY index, which weighs the dollar against six other major currencies, is down by 0.10% as of this writing. Nonetheless, that is still near one-month highs, and signifying that USDJPY trading pair’s latest gains still hang precariously. The yen’s upside is supported by falling US Treasury yields, which have returned below 4.300% on the 5-year and 10-year bonds. Higher US Treasuries and lower Japan’s government bonds typically exerts downward pressure on the yen.
Attention now shifts to one key release from the US, in the absence of high-impact data from Japan on Monday. The first key release, on the day was the new building permits numbers for February, which came in at 1.524 million, beating the forecast 1.518 million. This will provide support for the US dollar as the market waits for the new home sales data. The New Home Sales data for February, is expected to show a rise to 675,000 from 651,000.
Technical analysis
USDJPY faces resistance at the 151.31 pivot, and the downside will prevail as long as resistance remains at that level. With the sellers in control, a move by the pair below the support at 151.00 could build momentum to test 150.66. Alternatively, a move above 151.31 will favour control by the buyers, who will encounter resistance at 151.44. Extended control could build momentum to break the resistance and test 151.63.
