USD/JPY Forex Technical Analysis – ‘One and Done’ BOJ Intervention Not Enough to Change Long-Term Trend

The Dollar/Yen is trading nearly flat on Friday after an intervention by the Bank of Japan (BOJ) fueled a volatile response by the Forex pair the previous session. The move but the Dollar/Yen on track for its first weekly loss in more than a month on Friday.

On Thursday, Japanese authorities intervened in foreign exchange markets for the first time since 1998. The timing of the move was impressive, coming after the BOJ announced it was sticking with its ultra-low interest rates and before today’s public holiday.

At 08:00 GMT, the USD/JPY is trading 142.456, up 0.084 or +0.06%. On Thursday, the Invesco CurrencyShares Japanese Yen Trust ETF (FXY) settled at $65.64, up $0.69 or +1.05%.

With the BOJ’s monetary policy diverging with the rest of the major central banks, in order to have any success in driving the Japanese Yen higher, it’s going to have to continue to hit the market with a series of intervention moves, or the Yen will resume its downward trend.

This is not a situation whereby the currency is being manipulated. The weakness in the Yen is being driven by policy divergence. The U.S. Federal Reserve, for example, is raising rates and the BOJ is holding rates at ultra-low levels. As long as this trend continues, investors are going to seek the highest return. This means the U.S. Dollar will remain the most attractive asset.

Conditions could turn bearish for the USD/JPY if the BOJ shifts to a more hawkish policy while intervening. If this were to occur, the Forex pair would plunge.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum shifted to the downside on Thursday when the minor trend changed to down and the USD/JPY formed a potentially bearish closing price reversal top.

A trade through 140.353 will confirm the reversal top and indicate the selling pressure is getting stronger. A move through 145.900 will negate the potentially bearish chart pattern and signal a resumption of the uptrend.

On the upside, the nearest resistance is a pivot at 143.127. On the downside, the nearest support is a pivot at 140.855, followed by another at 138.156 and a retracement zone at 136.131 to 133.826.

Daily Swing Chart Technical Forecast

Trader reaction to 143.127 is likely to determine the direction of the USD/JPY on Friday.

Bearish Scenario

A sustained move under 143.127 will indicate the presence of sellers. Taking out the pivot at 140.855, followed by 140.353 will indicate the selling is getting stronger. This could trigger an acceleration into 138.156.

Bullish Scenario

A sustained move over 143.127 will signal the presence of buyers. If this creates enough short-term momentum then look for a retest of 145.900.