USD/JPY Analysis: Yen Rises Sharply after Hawkish Government Announcements

Since 2016, the interest rate in Japan has been in the negative zone and has remained unchanged — for more than 7 years it has been -0.10%. This makes Japan fundamentally different from other countries. But over the weekend the Yomiuri newspaper published an interview with Bank of Japan CEO Kazuo Ueda. He said the central bank could end the era of negative interest rates once it becomes clear that the 2% inflation target has been achieved.

Suppose these words may not be a declaration of intentions that will become reality, but just a verbal intervention aimed at supporting the yen. One way or another, the USD/JPY chart clearly shows signs of a change in sentiment:

→ last week, the bulls put pressure on the upper boundary of the ascending channel (shown in blue), increasing the likelihood of reaching the psychological level of 150 yen per US dollar;

→ last week’s close was near the high, but the current week began with a bearish gap, after which the yen weakened by 0.8% within just a few hours;

→ level 146.66, which served as support last week, now appears to be offering resistance. A similar action can be expected from the level of 147 yen per US dollar.

In the near future, the price may realize a scenario where it reaches important support from the median line of the ascending channel with a subsequent rebound from it. If this rebound does form, but it is no more than 50% of the unfolding decline, then we will have more arguments that bears are taking more control in the USD/JPY market amid government announcements.

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