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  • Traders are cautious as they assess the possibility of a second intervention from the BoJ.
  • Japan’s top officials are warning of appropriate action in the face of a weaker yen.
  • BoJ’s intervention is weakened by the monetary policy divergence between US and Japan.

Today’s USD/JPY outlook is bullish. The Japanese Yen is hovering around 32-year lows hit last Friday though the market assesses the possibility of more intervention by the Bank of Japan (BoJ).

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It has been about a month since Japanese authorities sold USD/JPY to help stabilize the currency’s price. The high at the time had been 145.90, and it is currently trading above 148 as investors focus on the psychologically important level at 150.

Masato Kanda, Japan’s Vice Finance Minister for International Affairs, declared that the government would react appropriately and strongly to excessive currency fluctuations,

Official market intervention is typically more effective when the fundamental conditions are favorable. While the Federal Reserve indicates that significant rate hikes are imminent, the BoJ has agreed to continue its ultra-loose monetary policy.

Therefore, this divergence in monetary policy does not allow market intervention to have long-lasting effects. The fundamentals still point to further upside potential for USD/JPY, which will only change when BoJ changes its monetary policy stance.

Data released earlier in the day showed increased industrial production in Japan from 2.7% to 3.4% in August. Investors had expected the value to hold at 2.7%. However, USD/JPY barely reacted to the news as it continued its bull rally.

USD/JPY key events today

There won’t be any significant news releases from Japan or the US, which could mean consolidation for the pair.

USD/JPY technical outlook: Bulls heading for 150

USD/JPY outlook

Looking at the 4-hour chart, we see the price trading well above 30-SMA and the RSI above 50. The price paused slightly at 147.05 but has since made an impulsive move and is trading close to 149.00. The RSI is in the overbought region, which usually indicates an extreme bullish momentum.

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At this point, bears can come in to push the price lower for a brief retracement of the recent move. However, seeing as the uptrend has stayed in the overbought region for some time without any retracement, this might not happen. Bulls are not giving bears any room to return, which could mean new highs above 149.00.

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