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  • The yen advanced on BoJ rate check rumor.
  • Japan’s government is considering intervening to stop the yen’s decline.
  • The yen might continue declining on BoJ’s loose policy.

Today’s USD/JPY forecast is bearish. The yen strengthened on Wednesday and moved away from a 24-year low following media rumors that the Bank of Japan conducted a rate check, possibly in advance of currency intervention.

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According to the Nikkei website, central bank officials ring dealers to determine the cost of purchasing or selling the yen. The website, however, did not disclose its sources.

Shunichi Suzuki, the finance minister for Japan, stated on Wednesday that the government was considering intervening to stop the severe declines in the currency, which a surging dollar has brought on.

Suzuki told reporters that recent yen movements have been “rapid and one-sided” and that if they continue, the government may choose to intervene in the currency markets by purchasing yen. However, there was doubt whether the possibility of intervention would provide long-term support for the yen.

“I would expect that it will probably lead to some temporary yen strength … but unless it’s coordinated with other global central banks or accompanied by a change of BOJ policy, I don’t expect it will last for too long,” said Udith Sikand, senior emerging markets analyst at Gavekal Research.

USD/JPY key events today

Investors are expecting the Producer Price Index from the United States, which will indicate the state of inflation. From Japan, there will be a trade balance report that is expected to show a drop from -1,433.9B to -2,398.2B in August.

USD/JPY technical forecast: Double top and bearish divergence at 144.89

USD/JPY forecast

The 4-hour chart shows the price breaking below the 30-SMA and the RSI at 50, on the verge of going below. This indicates a possible shift in momentum from bullish to bearish. The bullish trend has been strong for some time, with the price respecting the 30-SMA as support. However, the 144.895 level proved too strong a resistance for buyers who tried to break above twice without success. The RSI also showed weakness in the bullish move when it posted a bearish divergence. The price stopped respecting the 30-SMA as support showing it was consolidating.

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The trend will turn bearish if the price can fall below the previous low at 142.009. If this happens, the price will probably fall further to 140.041.

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