USD/JPY Under Pressure as Fiscal Year End Pushes Japanese Currency Higher

Key Takeaways

• Japanese Yen gains ahead of fiscal year end
• Japanese companies selling foreign bonds to improve balance sheets
• Repatriation flows expected, likely a one-off event
• Market focus to return to following yields

Overview

On Tuesday, the Dollar/Yen came under pressure as concerns over a full-blown banking crisis eased, leading to a decreased demand for safe-haven assets.

At 11:13 GMT, the USD/JPY is trading 131.006, down 0.566 or -0.43%. On Monday, the Invesco CurrencyShares Japanese Yen Trust ETF (FXY) settled at $70.82, down $0.42 or -0.59%.

Japanese Yen Strengthens Ahead of Fiscal Year End

Despite the Japanese Yen being considered a safe-haven asset, it is strengthening today due to increased flows ahead of Japan’s fiscal year end on Friday.

As a result, the dollar fell to a low of 130.508 Yen. This has partially undone the dollar’s 0.64% increase against the Yen in the previous session, which was linked to a significant rise in U.S. government bond yields.

Experts believe that Japanese companies are selling foreign bonds to improve their balance sheets. At this time of the year, Japanese repatriation flows are expected. However, this is likely a one-off event, and market focus will return to following yields.

Daily USD/JPY Technical Analysis

The main trend is down according to the daily swing chart. A trade through 137.911 will change the main trend to up. A move through 129.641 will signal a resumption of the downtrend.

The minor trend is also down. A trade through 133.02 will change the minor trend to up. This will shift momentum to the upside.

The minor range is 129.641 to 131.758. Its retracement zone at 130.700 – 130.450 is support. The nearest resistance is a Fibonacci level at 131.308, followed by a 50% level at 132.569.

Daily USD/JPY Technical Forecast

Trader reaction to the Fib level at 131.308 is likely to determine the direction of the USD/JPY on Tuesday.

Bearish Scenario

A sustained move under 131.308 will indicate the presence of sellers. This could lead to a retest of 130.700 – 130.450.

If 130.450 fails as support then look for a retest of the minor bottom at 129.641.

Bullish Scenario

A sustained move over 131.308 will signal the presence of buyers. Taking out 131.758 will indicate the buying is getting stronger with 132.579 – 133.002 the next target zone.