Japanese Yen rallies to 148.00 against USD

During Asian trading on Thursday, the Japanese yen advanced against its American counterpart, bolstered by increasing expectations of the Bank of Japan’s (BOJ) departure from negative interest rates later this month. Consequently, the dollar/yen pair depreciated – at the time of reporting – to 148.09 from 149.34, with the pair’s peak for the current trading day reaching 149.36.

Earlier today, Junko Nakagawa, a member of the Bank of Japan’s Board of Directors, remarked that the Japanese economy is steadily progressing towards attaining the central bank’s target of 2% inflation on a sustainable basis. Nakagawa’s remarks come in the wake of Jiji News’ report stating that at least one of the BOJ’s nine board members was inclined towards advocating for a hike in negative interest rates at this month’s policy meeting.

The potential shift away from negative interest rates by the Bank of Japan coincides with escalating expectations of rate cuts elsewhere, particularly from the US Federal Reserve, which is poised to provide much-needed support to the beleaguered Japanese currency.

In Japan’s bond market, the yield on 10-year Japanese government bonds surged to its highest level in two weeks, hovering around 0.74%. Similarly, the yield on two-year government bonds spiked above 0.19%, marking its highest level since 2011.

From a technical standpoint, recent attempts to breach the 151.00 level, marking the year-to-date peak, have resulted in repeated failures, signaling a bearish trend for traders. Additionally, indicators on the daily chart are showing negative momentum, suggesting potential further depreciation in the near term. A sustained decline below the 23.6% Fibonacci retracement level, situated around the 148.40-148.35 range, would confirm the bearish outlook, pushing the USD/JPY pair towards the 148.00 level. Subsequently, breaking below the 100-day Simple Moving Average at approximately 147.80 could expose the 38.2% Fibonacci retracement level near 146.80, with interim support near the 147.00 mark.

Conversely, the 149.00 level is likely to serve as immediate resistance, with further upside movement expected to encounter selling pressure near the 149.70 horizontal support-turned-resistance. However, sustained buying interest leading to a breach of the psychological barrier at 150.00 would indicate the end of the recent corrective phase and shift the bias in favor of bullish traders. In such a scenario, the USD/JPY pair could target the 150.40-150.50 range and attempt to reclaim the 151.00 round-figure mark.