Yen Crashes to a 6-Year Low, BOJ Plans to Buy Unlimited Amounts of JGBs
USD/JPY Soars as Yen Tumbles
by Bogdan Giulvezan
On Monday, the Bank of Japan intervened to stop Japanese Government Bonds (JGBs) from going above the key target and offered to buy unlimited amounts of said bonds at 0.25%. At press time the yen is trading at 123.23 against the US Dollar, which is the lowest it’s been in about 6 years.
Peace talks between Russia and Ukraine are set to take place this week in Turkey and there is hope of progress, as President Volodymyr Zelenskiy mentioned that Ukraine was ready to talk about adopting a neutral position, which would make a deal more probable.
The key release this week will be the U.S. Non-Farm Payrolls scheduled for Friday. As usual, it will have a hefty impact on the greenback, with 485K new jobs expected to be created and the unemployment rate expected to drop to 3.7%, which would be a new post-pandemic record.
Key Events for the Week Ahead
The first notable release will be the CB Consumer Confidence survey scheduled for Tuesday at 2:00 pm GMT. As the name suggests, it tracks changes in the levels of confidence among consumers, regarding economic conditions, jobs availability, and has a medium impact on the US Dollar.
Thursday at 12:30 pm GMT we take another look at U.S. inflation with the release of the Core PCE Price Index, which tracks changes in the price that consumers pay for the goods and services they purchase. Higher inflation can lead to a quicker pace of interest rate hikes, thus the indicator usually has a notable impact on USD pairs.
The most important release of the week is scheduled for Friday at 12:30 pm GMT: the U.S. Non-Farm Employment change report, which tracks changes in the number of employed people, excluding the farming industry. The forecast is 485K (previous 678K) and higher numbers usually strengthen the greenback. Keep an eye on the Unemployment Rate and Average Hourly Earnings data, released at the same time.
Technical Outlook – USD/JPY
The Yen is on the back foot and the pair looks like a moon-rocket, something that we would expect to see from a crypto pair in its full glory. But although the fundamentals don’t favor the Yen and the pair is in a clear uptrend, beware that a retracement will come sooner rather than later.
The RSI is overbought and if you scroll the chart way back to November 2015, you will see that the pair created a top around 123.75. At the time of writing USD/JPY is trading at 123.23, and the probability of it climbing into the mentioned resistance zone is very high.
When (or if) the pair hits the resistance at 123.75, we will likely see some sort of pullback and any strong advances past that point are less likely until that pullback/retracement occurs.
