Tentative buying amid Direct FX intervention fears

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The dollar/yen climbed on Friday, closing better for a sixth straight winning week. The rally was fueled as US Treasury yields resumed their climb overnight after a two-day decline, further supporting the greenback.

Treasuries did not trade in Tokyo on Friday due to the Good Friday holiday in the United States, as well as in other regions including Australia, Hong Kong and the United Kingdom.

On Friday, USD/JPY settled at 126.444, up 0.556 or +0.44%. The Invesco CurrencyShares Japanese Yen Trust ETF (FXY) ended at $74.39, down $0.18 or -0.24%.

Separately, Japanese Finance Minister Shunichi Suzuki warned on Tuesday that the government was monitoring the movements of the yen and their impact on the economy “with a sense of urgency”.

“Despite repeated verbal interventions over the past few weeks from Japanese policymakers, USD/JPY has continued to rise alongside rising US yields,” Goldman Sachs analysts wrote in a note.

“The odds of direct FX intervention are increasing, in our view,” and “should increase significantly once USD/JPY enters the 127-130 range,” they said.

Daily USD/JPY

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through 126.684 will signal a resumption of the uptrend.

A move through 121.284 will change the main downtrend. However, due to the prolonged rise in price and time, USD/JPY is ripe for a potentially bearish closing price reversal top.

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

The closest support is a series of minor pivots at 125.887, 125.078 and 123.984.

Short-term outlook

The direction of USD/JPY early Monday will likely be determined by traders’ reaction to the first pivot at 125.887.

Bullish scenario

A sustained move above 125.887 will indicate the presence of buyers. The removal of last week’s high at 126.684 will indicate that buying is strengthening. This could trigger an upward acceleration since there is no major support nearby.

Bearish scenario

A sustained move below 125.887 will signal the presence of sellers. If this creates enough downside momentum, expect selling to eventually extend into the support cluster at 125.089 to 125.078.

If 125.078 fails as support, look for a clean break in the pivot at 123.984.


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