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High Us Bond Yields and Fears of Involvement Push the USD/JPY to a New High for the Year

Leon Kramer

ByLeon Kramer

Sep 28, 2023

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  • The USD/JPY currency pair has recently achieved a notable milestone, reaching a new high of 149.18. Elevated US yields in the market have supported this upward movement.
  • The upward revision of the Federal Funds rate (FFR) by the Federal Reserve has resulted in a notable increase in the value of the USD, reaching new annual peaks.
  • The Japanese authorities have expressed their concerns regarding the observed levels of excessive volatility. Prime Minister Fumio Kishida and Finance Minister Shunichi Suzuki have raised these concerns.

The USD/JPY currency pair has recently reached a new year-to-date high of 149.18. However, market participants are exercising caution due to the expressed concerns of Japanese authorities regarding undesirable and excessive fluctuations in the foreign exchange markets. However, it is essential to note that the Greenback maintains a dominant position, supported by the persistently high levels of US Treasury bond yields. The currency pair is above the 149.00 level, exhibiting marginal gains of 0.12%.

The Yen Weakens but Stays Boosted by Japanese Officials’ Verbal Involvement

The depreciation of the Japanese Yen (JPY) continues to be mitigated by the statements made by Japanese authorities, with Finance Minister Shunichi Suzuki expressing his view that excessive volatility is not desirable. Prime Minister Fumio Kishida is the recent individual within the Japanese government who voiced support for the Yen. Additionally, he has instructed his cabinet to develop a forthcoming economic initiative to mitigate the adverse effects of inflation, encompassing essential sectors such as food and energy.

Aside from this, the US Federal Reserve Chair Jerome Powell’s prediction that interest rates would stay “higher for longer” has supported the yields on US Treasury bonds, which has helped the currency maintain its gains. In light of the Federal Reserve’s reassessment of its 2024 projections, wherein it determined that interest rates would be maintained above the 5% threshold, market participants responded in a manner consistent with this development. Consequently, an upward trajectory was observed in US bond yields, which subsequently led to an appreciation of the US Dollar.

Following the Federal Reserve’s decision, certain members of its governing body expressed the view that the United States central bank should exercise patience. However, the prevailing sentiment among the majority indicates an inclination toward implementing an additional increase in interest rates by the conclusion of 2023.

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The September Conference Board (CB) data indicates a decline in US Consumer Confidence. The CB Consumer Confidence index experienced a deceleration, declining from 108.7 in August to 103, falling short of the projected estimate of 105.5. This outcome reflects the prevailing pessimistic sentiment among Americans regarding the state of the economy.

The latest housing data indicates a trend divergence, as Building Permits experienced an upward trajectory while Home Sales witnessed a significant decline. This contrasting pattern can be attributed to the impact of elevated mortgage rates.

Price Analysis of the USD/JPY With a Focus on the Technical Perspective

From a technical perspective, the USD/JPY currency pair is poised to evaluate the 150.00 threshold in the foreseeable future. However, it is worth considering the potential impact of intervention threats, which may necessitate a cautious and adaptable approach when approaching this level. In the event of a breach within the region above, it is worth noting that the subsequent level of resistance would manifest at the October 21 high, specifically at 151.94.

Subsequently, the 152.00 threshold would emerge as the next point of interest. On the contrary, if the significant currency experiences a decline below the Tenkan-Sen level of 148.10, it may establish a path towards the most recent cycle low observed at 144.44, explicitly referring to the swing low recorded on September 1. During its downward trajectory, sellers would encounter significant levels of support, including the Kijun-Sen at 146.82, followed by the psychologically important level of 145.00.

USD/JPY chart

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Leon Kramer

Leon Kramer

Leon Kramer, a renowned financial author, enlightens Main Forex News readers with his deep understanding of currency markets. His years in global finance, combined with an intuitive grasp of trends, delivers insightful, up-to-the-minute foreign exchange analysis.

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