Market Analysis: USD/JPY Rate Updates the High of the Year

Yesterday, USD/JPY hit 146.74 for the first time since November 2022. The rise in the rate is facilitated by the growing gap in the policies of central banks: while the Bank of Japan has kept the rate below zero since 2016, the Fed has been raising rates since the spring of 2022.

Moreover, on Friday, Powell said the Fed is ready to continue to remain tough in the fight against inflation. According to CME's FedWatch tool, there is now a 62% chance of a rate hike at the Fed's November meeting, up from 42% a week earlier.

However, the limiting factor for the USD/JPY rate is the power of the Japanese Ministry of Finance. Last year, when the market was at current levels, the authorities intervened in the foreign exchange market, lowering the rate to 140 yen per US dollar.

The USD/JPY chart shows that:
→ the price continues to move within the ascending channel;
→ on Friday, during Powell's speech, the median line was tested, confirming its influence as a support;
→ former resistance at 144.8 also provides support;
→ if the trend continues, the rate may reach the upper limit of the channel — that is, the psychological mark of 150 yen per US dollar.

However, if we analyze the progress of the bulls when reaching the tops, then we can assume that the bullish momentum is depleted: after all, bullish candles do not have a wide body when they reach the highs, but on the contrary, they shrink. For sure, the strength of buyers is limited by fears of new interventions. Therefore, it is possible that a series of cautious renewal of the highs of the year may be interrupted when the Japanese authorities have their say.

According to analysts at Goldman Sachs, the yen may weaken to 155 per US dollar if the Bank of Japan continues to adhere to its ultra-soft position.