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Apr 17 - 11:55 AM

USD/JPY - COMMENT-USD/JPY Pullback Risk Rises While Key 155.00/20 Hurdles Still Hold

By Randolph Donney  —  Apr 17 - 10:15 AM

USD/JPY's breakout above 152 on strong U.S. data and hawkish Fed comments has become overbought as the pivotal 155 level and major technical targets at 155.20 are neared, making a breakout before consolidation or a correction more difficult.

Daily RSIs have surged to their most overbought since October 2022, the month the BoJ intervened to keep USD/JPY from clearing 152.
Today's modest retreat and first day without a new high since the 152 breakout, brings the first bearish rise in the trailing 10-day Bolli that often triggers a return to the 10-day moving average, last by 153.

The 10-week Bolli and weekly ATR-projected range tops are at 154.92/5.22, suggesting little space for further gains, at least this week.

And though Treasury-JGB yields spreads remain quite bullish, and regardless of hawkish U.S. data and Fed Chair Powell on Tuesday disallowing the prospect of rate cuts until a disinflationary data trend is reestablished, two-year Treasury-JGB yield spreads are 5bp below last week's 2024 peak and 10-year spreads are 4.5bp below Tuesday's 2024 highs.

The JGB yield curve continues to bear steepen, even if only 25bp of further 2024 BoJ rate hikes are being priced in.

The wild card for the biggest net spec USD/JPY long since 2007 is BoJ intervention.
There hasn't been a fresh episode of serious saber rattling this week and the assumption is intervention wouldn't reverse the macro-driven uptrend, just provide a correction and a better buying opportunity.

For more click on FXBUZ

Refinitiv IFR Research/Market Commentary


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