Naoto Arase, Head of the Fintech Department at PPLS.
The USD/JPY pair rebounded from a 129.65 low recorded on March 24 and soared to a high of 143.88 not seen in around seven and a half months, entering the high range of the previous November 10.
During this period, all major technical points – the Ichimoku conversion line, baseline, cloud upper/lower limit, 21/90/200-day moving average line and Bollinger mid-band – were surpassed, and an upward trend was established.
This indicated a strong buying signal in technical charts – such as an Ichimoku triple bullish trend reversal, a band walk bullish signal and a Dow Theory upward trend – which can determine the strength of market conditions.
Fundamentally, there are also factors suggesting the continued rise of the USD/JPY pair, such as:
(1) the long-term tightening of monetary policy speculated by the US Federal Reserve, with Fed Chairman Jerome Powell stating that two more rate hikes are “appropriate” for this year.
(2) The long-term easing of monetary policy by the Bank of Japan (BOJ), with Governor Kazuo Ueda and Policy Board Member Seiji Adachi taking a dovish stance; and (3) the difference in direction of Japanese and American monetary policies against the backgrounds mentioned in (1) and (2).
(4) The expansion of interest rate differentials between Japan and other countries, with the European Central Bank, the Bank of England and the central banks of Australia, Canada, Switzerland, Norway and Turkiye all raising policy interest rates this week.
(5) The expected activation of the yen carry trade against the aforementioned background earning.
Based on these factors, the US dollar will remain bullish and the yen bearish as the main scenario.
This week, attention will be focused on the statements of Japanese, American, European and British officials at the European Central Bank’s ECB Forum on Central Banking in Sintra, Portugal that concludes on June 29.
In addition, care is needed regarding, among other things, the analysis of each Policy Board Member’s view of inflation at the BOJ’s financial policy meeting, to be released this week, as well as Japanese verbal intervention – statements to prevent the yen gaining too much strength.
The predicted range for the end of June to beginning of July for the USD/JPY pair is 141.75-145.25.
