USD/JPY Testing Multi-Week Highs, Will the BoJ Wait Until the End of July?

USD/JPY Testing Multi-Week Highs, Will the BoJ Wait Until the End of July?

Japanese Yen Prices , Charts, and Analysis

• Official talk may no longer be enough to prop up the Japanese Yen
• JGB 10-year yield now back below 1.00%

Talk overnight by Japanese officials was unable to prop up the Japanese Yen with USD/JPY floating back to highs last seen in late April. Bank of Japan governor Kazuo Ueda stressed that he is looking at FX levels and their impact on import prices, while Japan's PM Fumio Kishida said that it was important to guide policy 'flexibly' to end deflation and promote growth . While both officials made market-related comments, the Japanese Yen continued to slip lower, testing levels that have seen FX intervention. The Bank of Japan said last week that they would cut their bond-buying program but would not announce by how much until the next BoJ meeting on July 31st. Unless the US dollar turns sharply lower, the BoJ will likely have to intervene to prop up the Yen as verbal intervention is no longer working.

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The yield on the 10-year Japanese Government Bond (JGB) has moved higher since the start of 2024 until a sharp reversal at the end of May. With markets now starting to question when officials will start to tighten monetary policy , in the short-term at least, the yield on the benchmark JGB 10-year will struggle to move appreciably higher.

Japanese Government Bond (JGB) 10-Year Yield

The daily USD /JPY chart looks positive, despite the CCI being in overbought territory. The pair are now above all three simple moving averages and are set to print a fresh multi-week high. Above the 158 area, there is little in the way of resistance before the recent multi-decade high at 160.215.

USD/JPY Daily Price Chart

Retail trader data show 25.87% of traders are net-long with the ratio of traders short to long at 2.87 to 1.The number of traders net-long is 11.66% higher than yesterday and 4.94% higher than last week, while the number of traders net-short is 5.87% higher than yesterday and 2.52% higher than last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests USD/JPY prices may continue to rise. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current USD/JPY price trend may soon reverse lower despite the fact traders remain net-short.