The US dollar has held firm against the Japanese yen currency around the 139.00 area after moving under the 140.00 level as the FX market takes note of the recent PMI Services data.
One of the main topics around the USDJPY pair now intervention. Many analysts think that the 145.00 level could be the area which the central bank look to step in.
Bank analysts concur. BNP Paribas analysts believe that the government’s ‘line in the sand’ hasn’t changed much from last year and see a high probability of yen-supportive intervention if the USDJPY surges to around 145.
The bank speculates that verbal push back from the MoF may only slow the pace of JPY weakness and is unlikely to trigger a sustained strengthening in the currency, and that the Bank of Japan may act before the Ministry of Finance (MoF) to address the weakening yen, BNP Paribas analysts have predicted.
BNP note that the “Japanese economy is in a stronger position than it was last year, benefiting from yen weakness through goods and services exports. However, high inflation and potential early elections could motivate the Prime Minister to prevent the yen from weakening too much and drawing attention to the rising cost of living”.
Going forward, the key thing to watch this week is that the trend remains short-term bullish while the price trades above the 138.00 level. However, a move under 138.00 could set up a test of the 135.00.
According to the ActivTrader Market Sentiment tool some 35% of traders are bearish towards the USDJPY pair and the other 65% are bullish, which strongly hints that we could see more downside.
With retail traders or participants are to very bullish the chances of a price correction to 138.00 are dramatically increased.
USDJPY Short-Term Technical Analysis
Technical analysis on the four-hour time frame shows that the USDJPY pair continues to hold inside the Ichimoku Cloud and is short-term bullish above its lagging and conversion line.
According to the location of the cloud then a break under the 139.00 level should be considered extremely bearish for the USDJPY pair. But currently, a buy signal is in from the Lagging Line.
USDJPY Medium-Term Technical Analysis
The daily time frame is showing that the USDJPY pair has formed a large a rising price channel style pattern. These are amongst the most reliable bearish reversal patterns, and this pattern is still valid.
According to Ichimoku analysis the price is working its way towards the top of the channel, around the 142.00 level.
Better to wait for a trend change of the price moves past the 142.00 level or a move down towards the bottom of the channel around the 134.00 level.
