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Japanese Yen Forecast: USD/JPY Rallies to Fresh Highs as Yields Surge

Japanese Yen Forecast: USD/JPY Rallies to Fresh Highs as Yields Surge

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USD/JPY Analysis and Talking Points

  • USD/JPY Upside Momentum Picking Up
  • Cleaner Positioning Opens Room for Net Shorts to Pick Up
JPY Forecast
JPY Forecast
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JPY: Once again USD/JPY is at a fresh two-decade high as topside momentum picks up with the pair now firmly above the 141.00 handle. Previously, a move to 140 had been touted as an area for Japanese Officials to look at possibly intervening in the currency. However, while the Japanese Yen is significantly weaker against the USD (and other currencies), the moves are not disorderly, which is the most important catalyst before Japanese Officials look at intervening. The Bank of Japan led by Governor Kuroda have dug their heels in by maintaining loose monetary policy, meanwhile, the rest of the world is embarking on larger than normal rate hikes with a 75bps rate rise becoming the norm. As such, with rate differentials continuing to move against the Yen, the currency has thus found little in the way of support.

Elsewhere, net short positioning in the Japanese Yen has also eased up in recent weeks as traders attempt to buy the Yen dip, meaning that there is room for net shorts to build up again in the currency. In turn, this opens the door for the pair to move towards the 145 handle, particularly as global bond yields continue to rally. As a reminder, when gauging the potential direction of USD/JPY it is important to watch the direction of US yields (most notably the benchmark 10yr) as shown in the chart below.

USD/JPY Positioning

Source: Refinitiv

USD/JPY vs US 10YR Yield

Source: Refinitiv

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