USD/JPY Weekly Analysis: At last Japanese PM comments on JPY

Those who have been doing forex for a long time know very well that the Bank of Japan occasionally intervenes in the forex market on JPY. The most interesting thing is that last week, the Japanese Prime Minister Kisida indirectly intervened in JPY. This is why the Japanese yen has strengthened quite a bit against the dollar. Although USD / JPy did not drop much like that, but in the days to come USD / JPy has created a chance to drop.

Although it is very difficult to say with certainty, because in the last few years, inflation in Japan is now skyrocketing. According to this month's report, Japan's national CPI has risen from 1.2% to 2.5%. This is the highest in the last 8 years.

Last week, Japanese Prime Minister Kisida said prices of raw materials had risen on the one other hand, and the weakening yen had made life and trade difficult. Such comments from a Prime Minister are a kind of indirect intervention.

Japanese Yen Safe Haven Currency We all know this. But we haven't seen it in the Japanese yen movement in the last few months though. The main mastermind behind the weak yen though is the Bank of Japan itself. The Bank of Japan has used various tricks to weaken the Japanese yen in order to stabilize Japan's bond market and keep inflation targets in check. The Japanese yen has had a negative correlation with the US bond market due to safe haven. In other words, as the US bond rate rises, the Japanese yen, as a safe haven, weakens, just like gold.

Just as gold has strengthened somewhat since the US bond market dropped last week, so has the Japanese yen. Falling of the US 10 years bond and the Japanese prime minister’s comments on the weak Japanese Yen helped USD / JPY to drop.

Technically, however, USD / JPY may drop more in the next week, as USD / JPY has broken below of the trend line support. However, if 127.00 / 126.85 is not broken out, maybe USD / JPY will not drop much. And for this we need a big catalyst. And it could be next week's FOMC.
After FOMC we will know if USD / JPY will be stable below 126.85 or not. If USD / JPY stabilizes below 126.85, then technically there is a hope that USD / JPY might test up to 125.00 and 121.00 again.

Major support from current rate is 127 / 126.85 price zone. If the market is stable below 126.75 then the next target is 125.00 and if the breakout is 125.00 then the final target is 121.50.

Although I do not yet think that USD / JPY will drop below 125.00 very easily. Because in the coming days, the Fed will raise the benchmark. Bank of Japan’s bank rates on the other hand is still -0.10% and there is no sign that they are going to hike rates very soon. So, as a carry-on trade, it may still be profitable for investors to have USD/JPY in buy mode. Since the Japanese yen is safe haven, and the Japanese prime minister sees the weak Japanese yen as a problem, So, USD / JPY has created an opportunity to go down further.


On the other hand, if USD / JPY stabilizes above 129.80 again, the market may test 131 / 131.50 area again. And if it breaks above 131.50 this time, our last target is 135.00 area. 135.00 Area Very Critical Resistance Level. Correction can easily drop from 135.00 market.