JAPANESE YEN PRICE, CHARTS AND ANALYSIS:
- AUD/JPY Rises as RBA Continue on Hiking Cycle and Hint at More to Come.
- USD/JPY Clears 200-Day MA and Eyes a Return Above the 140.00 Mark.
- EUR/JPY Hits 15-Year High. Bullish Momentum Remains Intact Above the 146.50 Handle.
- RSI Remains in Overbought Territory for All Three JPY Pairs and Thus a Retracement Cannot be Ruled Out.
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Read More: Japanese Yen Price Action Setups: EUR/JPY, USD/JPY, AUD/JPY
JAPANESE YEN BACKDROP
The Japanese Yen has struggled since last week’s Bank of Japan (BoJ) meeting which struck a dovish tone with the promise of conducting a review of its monetary policy. Improving sentiment following positive US earnings and rising rate hike expectations has seen the Yens safe haven appeal take a knock.
There has been an increase in expectations around rate hikes and global central banks maintaining a higher rate for longer is in complete contrast to the current BoJ policy. This has partly contributed the Yens struggles over the past week with this morning’s pivot by the Reserve Bank of Australia (RBA) which surprised markets by resuming its hiking cycle with Governor Lowe stating that the Board has a strong consensus to hike rates. The ECB and Fed meetings are due this week with inflation remaining a particular issue in many developed nations.
Given the inflation conundrum further hikes are expected particularly by the ECB and BoE in 2023 with Australia now seen reaching a peak rate of around 4%. Should we see this divergence continue for the rest of Q2 without any change by the BoJ the Yen could be in for a bumpy ride. A recent poll by economists, however, sees the Yield Cuve Control policy being changed as early as June which in my humble opinion may be a bit too optimistic. Inflation data out of Japan will be key as well for the BoJ decisions moving forward as intimated already by the new Governor Kazuo Ueda.
RISK EVENTS IN THE WEEK AHEAD
There is a host of risk events for the week ahead particularly out of Europe and US which could further impact overall sentiment as well as Yen pairs. EURJPY, USDJPY and AUDJPY face their biggest tests as data continues to filter through.
They Key Risk Events to Keep an Eye on:
For all market-moving economic releases and events, see the DailyFX Calendar
PRICE ACTION AND POTENTIAL SETUPS
EURJPY
EUR/JPY Daily Chart
Source: TradingView, prepared by Zain Vawda
EURJPY has continued its rally of late since bouncing off the ascending trendline from the March 24 lows. The trendline provided since significant support which propelled the Euro to a 15 year high against the to trade above the 150.00 psychological level.
EURJPY does appear slightly overextended following the recent rally with the RSI now in overbought conditions as well. Price action has also printed a fresh high which could hint at some form of reversal or retracement is the short-term. A break below the 150.00 psychological level could see the previous swing high serves as support around the 148.60 handle. A break below the 148.60 support area the trendline comes into a play.
As the battle of the Central Banks rage on a key driver for EURJPY this week will be the ECB meeting. A hawkish rhetoric by ECB President Lagarde or a 50bps hike may push the Yen further into the doldrums with acceptance above the 150.00 handle key for immediate continuation.
USD/JPY Daily Chart
Source: TradingView, prepared by Zain Vawda
From a technical perspective, the daily chart for USD/JPY broke the channel it had been stuck in yesterday since the early days of April.
A break and daily candle close above the Ascending channel on Friday hinted a huge continuation could potentially arise. Yesterday saw USDJPY test the 200-day MA which failed to affect the pair as well by closing above for the first time since December 22. The RSI here is also hinting at overbought conditions for the pair supported by the recent higher high print on the daily chart and could see USDJPY retest the 200-day MA before attempting a retest of the channel breakout. Key support levels to keep in mind 137.00, 135.00 and 133.00 with a daily candle close below the 133.00 invalidating any bullish setup.
AUD/JPY Daily Chart
Source: TradingView, prepared by Zain Vawda
The AUDJPY setup form last week's article was the best without a doubt rallying over 400-odd pips from its lower high print around the 88.00 mark. This level lined up perfectly with the preferred entry area (61.8-78.6 discussed in last week's outlook) using the Fib Retracement Tool.
AUDJPY has been on a staircase higher since bottoming out on March 24. The move since has been a clear indication of price action at work as we have consistently printed higher highs and lows on our way to trade around the 92.00 handle. Similar to EURJPY and USDJPY the main concern here is that the RSI is now in overbought territory as well while we have significant resistance around the 92.00 handle and above that at the 93.00 handle.
Following the recent rally on YEN pairs it might be smart to keep a short-term outlook for the rest of the week. Strong bullish trends remain in play, but a retracement may be imminent across Yen pairs.
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--- Written by Zain Vawda for DailyFX.com
Contact and follow Zain on Twitter: @zvawda
