USD/JPY: Could Weaken Under 126.444 Amid Intervention Fears

The Dollar/Yen is inching higher on Monday, hitting a fresh two-decade low as the dollar continued to climb on the back of higher Treasury yields. Volume continues to remain light as the major players ease back into trading following an extended Easter holiday weekend in some parts of the world.

The thin volume and tentative buying is also being attributed to bearish comments from top Japanese policymakers and the growing fear of a potential direct FX intervention designed to strengthen the Yen.

At 11:10 GMT, the USD/JPY is trading 126.610, up 0.166 or +0.13%. Last Thursday, the Invesco CurrencyShares Japanese Yen Trust ETF (FXY) settled at $74.39, down $0.18 or -0.24%.

Yen Bounces Higher Amid Japanese Policymaker Comments

After an early test of the two-decade low, the Japanese Yen bounced higher after both Bank of Japan Governor Haruhiko Kuroda and Finance Minister Shunichi Suzuki voiced concerns about its low valuation. But the move was short-lived.

Japanese policymakers have been vocal about their concerns around the falling Yen, particularly after it slipped to the weaker side of 125 per dollar on April 11.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through the intraday high at 126.789 will signal a resumption of the uptrend.

A move through 121.284 will change the main trend to down. This is highly unlikely but due to the prolonged move up in terms of price and time, the USD/JPY is currently inside the window of time for a potentially bearish closing price reversal top.

The minor trend is also up. A trade through 125.089 will change the minor trend to down. This will shift momentum to the downside.

There is no visible resistance at current price levels, but the nearest support is a series of pivots at 125.939, 125.130 and 124.037.

Daily Swing Chart Technical Forecast

The direction of the USD/JPY into the close on Monday is likely to be determined by trader reaction to 126.444.

Bullish Scenario

A sustained move over 126.444 will indicate the presence of buyers. Taking out the intraday high at 126.789 will indicate the buying is getting stronger. This could trigger an acceleration to the upside.

Bearish Scenario

A sustained move under 126.444 will signal the presence of sellers. The first downside target is the pivot at 125.939. Buyers could come in on the first test of this level, but if it fails then look for the selling to possibly extend into the support cluster at 125.130 – 125.089.

Taking out 125.089 could spike prices into the next pivot at 124.037, followed by the next minor bottom at 123.471.