- Japan’s top currency diplomat issued a warning as the yen dropped to a 10-month low.
- Markets are preparing for a possible yen intervention.
- Concerns about China and global economic growth dampened risk appetite.
Today’s USD/JPY forecast is slightly bearish. The yen strengthened after Japan’s top currency diplomat issued a warning following its earlier drop to a 10-month low.
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The yen gained ground, rising by as much as 0.4% to 147.02 per US dollar. Notably, Masato Kanda, Japan’s leading currency diplomat, stated that they would not rule out options if speculative movements continued.
This was the strongest warning issued since mid-August. Previously, the Asian currency had been hovering around the critical 145-per-dollar threshold. Consequently, traders have been closely monitoring signs of intervention by Tokyo.
Moreover, Masato Kanda, who serves as Japan’s vice-minister of finance for international affairs, has played a central role in Japan’s efforts to curb the yen’s sharp depreciation. Chris Turner, ING’s global head of markets, said, “These remarks suggest that intervention could be imminent, especially with the yen approaching the intervention zone we witnessed last year.”
Initially, Japan had intervened in the currency markets a year ago when the dollar surpassed 145 yen. This led the Ministry of Finance to purchase yen and push the currency pair back to approximately 140 yen. According to Turner, we may see intervention again. However, that doesn’t necessarily mean the underlying trend will reverse anytime soon. Furthermore, he pointed to the ongoing strength of the US dollar.
Meanwhile, the dollar remained close to a six-month high, as concerns about China and global economic growth dampened risk appetite.
USD/JPY key events today
Investors are awaiting US PMI data from the Institute of Supply and Management and S&P Global. These reports will show business activity in the non-manufacturing and services sectors respectively.
USD/JPY technical forecast: The 147.00 level holds firm as support.
On the charts, USD/JPY has fallen back after reaching new highs above the 147.00 key level. The bias on this chart is bullish as the price has made a higher high above the 30-SMA and the RSI reached overbought before pulling back.
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The price fell to retest the 147.00 level as support. It has bounced back sharply, showing 147.00 is a strong level. This might then allow the bullish move to continue, with the next target at the 148.01 resistance level.
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