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USDJPY Prints a Fresh 20-Year High as the BoJ Buys More Bonds

USDJPY Prints a Fresh 20-Year High as the BoJ Buys More Bonds

Nick Cawley, Senior Strategist

USD/JPY Price and Chart Analysis

  • Bank of Japan buying JGBs again.
  • The USD/JPY 130.00 ‘line in the sand’ nears.
  • Retail traders are short and caught.
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The Bank of Japan (BoJ) is back in the market and buying an unlimited amount of government bonds to keep 10-year JGB yields below 0.25% in a further effort to re-boot the country’s ailing economy. While other countries are looking to reduce their balance sheets (quantitative tightening), the Bank of Japan continues to pour money into the economy, diverging further from other major global central banks.

Japan’s loose monetary policy, exacerbated by this third round of bond buying, continues to weigh on the Japanese Yen, weakening it further across the board. The BoJ will intervene at some stage to try and temper the Yen’s losses but at what level and with what commitment is the question. At the start of this month, the USD/JPY 125.00 level was seen as the ‘line in the sand’ which if crossed would spark intervention by the BoJ, mainly verbal. This level has held, there or thereabouts, for around two decades and finally fell this month. It is now likely that 130.00 becomes the next market for the BoJ who have already warned about the sharp moves in the currency. It remains to be seen how the BoJ can stop the Yen from falling further while at the same pumping money into the economy by buying government debt.

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The monthly USD/JPY shows the 15-month USD/JPY rally and the ease with which the pair took out prior monthly resistance at 118.66 and 123.75 before brushing aside 125.00. It is now likely that the last two areas become support, especially with the BoJ buying bonds, leaving 130.00 as the next target. If this breaks conclusively, and it may be difficult in the short term, then 135.20 becomes the next landing zone.

USD/JPY Monthly Price Chart – April 20, 2022

Retail traders are having a tough time with USD/JPY with the latest data showing a heavy and growing, short bias. Retail trader data show 26.82% of traders are net-long with the ratio of traders short to long at 2.73 to 1. The number of traders net-long is 10.93% higher than yesterday and 26.11% higher from last week, while the number of traders net-short is 5.76% higher than yesterday and 2.25% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests USD/JPY prices may continue to rise. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current USD/JPY price trend may soon reverse lower despite the fact traders remain net-short.

USD/JPY Bearish
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 8% 0% 2%
Weekly 12% -7% -2%
What does it mean for price action?
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What is your view on the Japanese Yen – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.