Japan

USD/JPY set a lower-high last week even as DXY spiked up to a fresh two-year-high. And there’s now a short-term descending triangle formation setting up in the pair.

The 150 level had held as resistance in USD/JPY until this week’s US open, at which point another DXY-fueled breakout appeared. The next major level up is the same that held multi-year highs in the pair in Q4 of each of the past two years.

It’s been a fast start to Q4 for the US Dollar. The turn in EUR/USD was a big driver yesterday and today, USD/JPY has taken over with buyers continuing a strong bounce from the Monday low.

Earlier this month I had warned that the fall on USD/JPY from the July high might already be a crowded trade. A plunge in open interest and an engulfing week on yen futures suggests I was right to be suspicious.

Next week brings three major central bank meetings, none of which seem to be on the same page policy wise. The Fed are expected to cut by 25bp and potentially set the record straight on another ‘50bp’ cut November, whereas there’s also an outside chance the BOJ may surprise with an interest rate hike given their renewed hawkish narrative. And while the Bank of England are expected to hold rates, a soft set of inflation figures could bring forward bets of a November cut.

USDJPY Outlook: As monetary policy cycles operate with a lag, the impact of US interest rates is increasingly evident in the weakening US labor market, pushing the USDJPY closer to its 2024 lows ahead of the Non-Farm Payroll (NFP) employment reports.

It’s been a busy two weeks since the last US CPI report and given the sell-offs in USD/JPY and Nasdaq 100 Futures, there are percolating fears of a larger correction.

The Japanese Yen continues to fall even after last week’s threats of intervention. USD/JPY is trading at a fresh 37-year high as EUR/JPY, GBP/JPY and AUD/JPY have all shown considerable strength.

The Bank of Japan is on the hot seat, and it seems that they’re getting backed further and further into a corner.

Another day, another milestone for USD/JPY which closed above 152 for the first time in nearly 34 years on Thursday.

Japan's core CPI didn't fall below the BOJ's 2% target, although it did match it. Which has seen AUD/JPY and USD/JPY retrace further from their highs in light of yen strength.

A bearish reversal pattern has formed on USD/CNH which implies a move down to 7.10. And if the yuan continues to strengthen, it could see the yen follow and scupper USD/JPY attempt at breaking 152.

Yen weakness has come rushing back in early-2024 trade, but U.S. and U.K. CPI could provide a jolt to FX trends in USD and GBP, which could produce some change in both USD/JPY and GBP/JPY.

USD/JPY traders barely acknowledged the release of Japan’s October inflation report, reinforcing the view the only thing that matters for the pair right now is developments in the US economy, unless the Bank of Japan (BOJ) signals or starts to normalise monetary policy.

It’s been a wild ride in the Japanese Yen of late as the pair showed the initial stages of a reversal last week, eventually running down to key support at 147.37. Bulls have made a loud statement since that inflection, and this opens the door for a re-test of the 150.00 handle.

As activity in other advanced economies starts to splutter, Japan is firing up.

Another way to support the Japanese yen may be for the BOJ to stop intervening in markets.