- The yen rallied as investors turned cautious amid warnings of intervention.
- Masato Kanda warned that authorities will do whatever it takes to support the yen.
- Economists believe that US GDP will remain at 3.2%.
USD/JPI forecast tilts slightly bearish as Japanese intervention warnings breathe new life into yen. After hitting a 34-year low on Wednesday, the yen rallied as investors became wary of warnings from Japanese authorities.
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Notably, the yen has weakened sharply since the Bank of Japan changed its monetary policy by raising interest rates. This weakness came as markets realized that policy change would be slow and gradual. Consequently, the interest rate gap between the US and Japan will remain significant. Still, Japanese policymakers believe the market’s reaction has been exaggerated. Because of this, a number of top officials came out to warn the markets about the sharp decline in the Japanese currency.
On Wednesday, top currency diplomat Masato Kanda warned that authorities would do whatever it takes to stop further sharp currency swings. However, current fundamental indicators point to a possible further decline for the currency. A slow increase in the cycle would keep the yen vulnerable as other major central banks keep interest rates higher.
In addition, inflation could miss BoJ forecasts as economists expect inflation to fall in Tokyo. Therefore, there is a good chance that Japan will step in to support its weak currency.
On the other hand, the dollar was steady on Thursday as investors prepared for more economic data. The US will release data on economic growth and jobless claims. Economists believe that US GDP will remain at 3.2%. A higher-than-expected figure could push USD/JPI higher.
USD/JPI Key Events Today
- Final US GDP q/q
- US unemployment claims
- USA pending house sales m/m
- US consumer sentiment
USD/JPI Technical Forecast: Bears signal imminent takeover
On the technical side, the USD/JPI price is pulling back after approaching the key resistance level of 152.01. Furthermore, the bears are trying to take over which would cause prices to fall. The bullish trend weakened as the price approached 152.01. Notably, the price started trading near the 30-SMA support and the RSI showed a bearish divergence.
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Moreover, the bears showed strength when the price made a solid bearish candle that broke below the 30-SMA. At the moment, the price is still retesting the recently broken SMA. If the bears are ready to take over, the price will soon retest the key support level of 150.00, which is near the 0.382 Fib retracement level.
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