empty
22.08.2023 08:38 AM
USD/JPY faces obstacles on the way up

This image is no longer relevant

At the start of the week, the USD/JPY pair showed an impressive upward momentum, closely approaching its high from August 17 at 146.565. However, it failed to settle at this level. According to experts, the bullish potential of USD/JPY appears to be limited. Let's discuss what is affecting the quote and where its growth ceiling lies.

USD bulls getting ready for Jackson Hole

Yesterday, USD/JPY surged by 0.56% to 146.2 even though the market exhibited a rather cautious sentiment ahead of this week's key event - the Federal Reserve Symposium in Jackson Hole.

A sharp spike in US Treasuries yields provided support for the pair. Last Monday, the yield soared to its highest level since 2007, at 4.35%.

The increase in the yield of US government securities was influenced by speculations suggesting that the US interest rates might remain high for an extended period.

Presently, dollar bulls are hopeful that the Federal Reserve will continue its hawkish monetary policy for the coming months.

Such a strategy should ideally support the US dollar, which could initially react with a drop if there is any pause in US rate hikes. The majority of market participants believe that this figure has peaked and will not rise any further.

Many analysts posit that dollar buyers might receive validation of their theory about an extended period of high-interest rates this week.

Jerome Powell, the head of the US central bank, is expected to speak at the annual Federal Reserve Symposium in Jackson Hole on Friday. If Powell emphasizes the necessity of keeping the rates higher for longer, it would significantly boost the US currency.

Currency strategists predict even stronger dollar volatility if the Fed Chairman leaves the door open for another rate hike.

"In such a scenario, a new USD rally is likely to form. I wouldn't rule out that the US dollar index might break above 104 in the near term," stated Westpac analyst Richard Franulovich.

His colleagues at MUFG also see further growth potential for the US currency. However, experts from the Japanese bank are convinced that USD/JPY will significantly lag in its growth pace compared to other dollar majors.

"Given that the USD/JPY asset is currently in the intervention danger zone, we anticipate intensified threats from Tokyo in the foreseeable future. This will be the main obstacle for the quote on its upward path," noted the MUFG economists.

Where is the growth limit for USD/JPY?

Last year, the Japanese government intervened in the market twice with the intention to support its national currency when it sharply declined against the US dollar.

The first intervention was triggered when the yen depreciated to 145 per US dollar. This year, JPY has repeatedly crossed this mark, and the Japanese authorities have confined themselves to warnings about potential interventions.

This could indicate that the so-called "red line" has shifted to the 150 mark. Testing this level triggered the second intervention in 2022.

"We believe that the Japanese Ministry of Finance will not intervene in the currency market around the 145 mark. The new intervention threshold for purchasing yen is around 150," analysts from J.P. Morgan stated last Monday.

Additionally, experts pointed out that the need for intervention at this stage is not as pressing as it was in September and October of the previous year. This is because the fundamental conditions of the Japanese economy have significantly improved since Tokyo's last market intervention.

Currently, the 150 mark seems to be a sort of growth limit for the USD/JPY pair. However, many analysts are skeptical that the asset will approach this level anytime soon, even if Jerome Powell's tone at Jackson Hole is extremely hawkish.

In the foreseeable future, the price is likely to remain under the influence of speculations about upcoming monetary changes in Japan. These speculations intensified this morning against the backdrop of a rapid increase in the yields of 10-year and 30-year Japanese government bonds.

On Tuesday, both metrics surged to their highest levels since 2014, registering at 0.66% and 1.66% respectively. This was facilitated by a significant improvement in economic growth and inflation indicators in Japan.

Following recent optimistic data and the latest adjustments by the Japanese regulator to the yield curve control mechanism, traders have started to increase bets on the Bank of Japan (BOJ) potentially abandoning its ultra-soft monetary policy soon.

Further strengthening of hawkish market sentiments regarding the monetary policy of the Bank of Japan will also serve as a serious obstacle for the USD/JPY pair.

Analysts at UOB predict that, given such a fundamental backdrop, it is unlikely for the major to rise above 147.50 in the coming weeks.

Аlena Ivannitskaya,
Analytical expert of InstaForex
© 2007-2025
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST

Recommended Stories

Bitcoin: What to Expect This Week. BTC Hits $107,000 – Can the Record Hold?

The leading cryptocurrency is fighting to maintain its position, even though it's not always smooth sailing. Currently, BTC is out in front, slightly simplifying the task of holding higher ground

Larisa Kolesnikova 00:40 2025-05-20 UTC+2

US consumption losing steam

In the upcoming week, Wall Street's attention will be focused on earnings reports from the largest US retail chains — crucial indicators of how changing trade conditions are impacting

13:30 2025-05-19 UTC+2

US Market News Digest for May 19

Despite encouraging statements about progress in trade negotiations and high-level diplomatic visits, forecasts for the S&P 500 remain restrained. Analysts point to the index's lack of growth compared

Ekaterina Kiseleva 12:20 2025-05-19 UTC+2

The American consumer is slowing down: What Target, Lowe's and Walmart are saying

Wall Street will be focused on earnings reports from the largest US retailers this week to gauge how changing trade conditions are affecting the economy and whether the recent stock

Thomas Frank 10:35 2025-05-19 UTC+2

US Market News Digest for May 16

Shares of Micron Technology are extending their steady rally, bolstered by encouraging technical signals. Investors are eyeing price targets at 117.34 and 137.12, making the stock attractive in both

Ekaterina Kiseleva 13:20 2025-05-16 UTC+2

STOXX 600 storms the peaks: where is the growth heading and what awaits investors

Cisco rises after raising its forecasts for the financial year UnitedHealth falls on the news that it faces a criminal investigation European STOXX 600 index is set for a fifth

Thomas Frank 11:22 2025-05-16 UTC+2

USD: Weak on the Surface – Strong at the Core. The Game Isn't Over, the Dollar Prepares an Unexpected Move

A new phase is beginning in the currency market, where economic fundamentals and geopolitical strategy shape the U.S. dollar's exchange rate. The U.S. administration is subtly considering the idea

Anna Zotova 00:39 2025-05-16 UTC+2

Stock market rollercoaster: AMD soars, American Eagle falls, investors are confused

Indices mixed: Dow down 0.21%, S&P 500 up 0.10%, Nasdaq up 0.72% European stocks fall after four sessions of gains American Eagle Outfitters falls after withdrawing fiscal year guidance

Thomas Frank 12:59 2025-05-15 UTC+2

US Market News Digest for May 15

Shares of JPMorgan Chase continue to climb steadily towards the 295.25 level, supported by strong investor demand and solid financial results from the bank. This positive momentum stems from broader

Ekaterina Kiseleva 12:35 2025-05-15 UTC+2

US Market News Digest for May 14

IBM stock continues to climb, supported by technical chart signals pointing to a potential move towards the $265.90 level. Investors are showing interest in the company's stock, backed by strong

Ekaterina Kiseleva 12:40 2025-05-14 UTC+2
Can't speak right now?
Ask your question in the chat.
Widget callback
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaForex anyway.

We are sorry for any inconvenience caused by this message.