Sep 18, 2023

The Bank of Japan’s policy meeting on Friday is the main event this week.

Governor Kazuo Ueda’s comments about a possible shift away from ultra-loose policy have raised expectations of a change.

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USDJPY: Day Chart

The upcoming FOMC decision on Wednesday has the potential to reignite investor concerns about the Japanese yen’s depreciation, particularly if the Fed adopts a more hawkish stance or the Summary of Economic Projections (SEP) highlights higher-than-expected inflation.

On the other hand, intervention by the Japanese Ministry of Finance in the currency markets has been a mixed bag.

The Japanese yen is currently in a bear market against the US dollar. Although the USD/JPY exchange rate ended the previous week with little change, the reversal in strength seen earlier in the week on Friday highlights the broader upward technical bias for the exchange rate.

The 20-day moving average has been a key factor in sustaining the upward trend, while the inflection zone at 146.56 has been held. However, it is important to note that a negative RSI divergence is present, which is a sign of weakening upward momentum and could potentially lead to a reversal.

Despite recent losses, the longer-term bullish bias is still intact, as rising support from earlier this year continues to hold. Further losses would be needed to reverse the upward trend.

The immediate resistance level is the 61.8% Fibonacci extension level at 148.27. If the price clears this level, it could rise to last year’s high of 151.94.

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