• GBP/USD stays in a consolidation phase above 1.2500 early Friday.
• The technical picture suggests that the bullish bias remains intact.
• The 200-day SMA aligns as strong resistance at 1.2560.

GBP/USD closed the third consecutive day in positive territory on Thursday and climbed to its highest level in two weeks at 1.2540 early Friday. The pair retreated toward 1.2500 in the European session but the technical outlook suggests that the bullish bias remains intact.

The US Dollar (USD) weakened against its rivals after disappointing US data on Thursday. The US’ Gross Domestic Product (GDP) expanded at an annual rate of 1.6% in the first quarter. This reading followed the 3.4% growth recorded in the last quarter of 2023 and came in below the market expectation for an expansion of 2.5%. 

Early Friday, the positive shift seen in risk mood doesn’t allow the USD to gather strength and helps GBP/USD hold its ground. At the time of press, S&P Futures were up 0.65% on the day. In case Wall Street’s main indexes open decisively higher, the USD could come under renewed selling pressure in the American session.

The US Bureau of Economic Analysis (BEA) will release the Personal Consumption Expenditures (PCE) Price Index data for March later in the day. On Thursday, the BEA said in the GDP report that the PCE Price Index rose 3.4% on a quarterly basis in the first quarter.

The CME FedWatch Tool shows that markets see a nearly 90% chance that the Federal Reserve (Fed) will leave the policy rate unchanged in June. Given that investors already saw the quarterly change in the PCE Price Index, the monthly data is unlikely to influence the Fed’s rate outlook in a meaningful way. Hence, the market reaction to the monthly PCE inflation print could remain short-lived.

GBP/USD Technical Analysis

The Relative Strength Index on the 4-hour chart stays above 60 and the gap between the 20-period and the 50-period Simple Moving Averages (SMA) continues to widen following the bullish cross, highlighting the bullish bias.

On the upside, 1.2530 (Fibonacci 38.2% retracement of the latest downtrend) aligns as immediate resistance before 1.2560 (200-day SMA). Supports are located at 1.2450 – 1.2440 (Fibonacci 23.6% retracement, 50-period SMA) and 1.2400 (psychological level, static level).

• GBP/USD stays in a consolidation phase above 1.2500 early Friday.
• The technical picture suggests that the bullish bias remains intact.
• The 200-day SMA aligns as strong resistance at 1.2560.

GBP/USD closed the third consecutive day in positive territory on Thursday and climbed to its highest level in two weeks at 1.2540 early Friday. The pair retreated toward 1.2500 in the European session but the technical outlook suggests that the bullish bias remains intact.

The US Dollar (USD) weakened against its rivals after disappointing US data on Thursday. The US’ Gross Domestic Product (GDP) expanded at an annual rate of 1.6% in the first quarter. This reading followed the 3.4% growth recorded in the last quarter of 2023 and came in below the market expectation for an expansion of 2.5%. 

Early Friday, the positive shift seen in risk mood doesn’t allow the USD to gather strength and helps GBP/USD hold its ground. At the time of press, S&P Futures were up 0.65% on the day. In case Wall Street’s main indexes open decisively higher, the USD could come under renewed selling pressure in the American session.

The US Bureau of Economic Analysis (BEA) will release the Personal Consumption Expenditures (PCE) Price Index data for March later in the day. On Thursday, the BEA said in the GDP report that the PCE Price Index rose 3.4% on a quarterly basis in the first quarter.

The CME FedWatch Tool shows that markets see a nearly 90% chance that the Federal Reserve (Fed) will leave the policy rate unchanged in June. Given that investors already saw the quarterly change in the PCE Price Index, the monthly data is unlikely to influence the Fed’s rate outlook in a meaningful way. Hence, the market reaction to the monthly PCE inflation print could remain short-lived.

GBP/USD Technical Analysis

The Relative Strength Index on the 4-hour chart stays above 60 and the gap between the 20-period and the 50-period Simple Moving Averages (SMA) continues to widen following the bullish cross, highlighting the bullish bias.

On the upside, 1.2530 (Fibonacci 38.2% retracement of the latest downtrend) aligns as immediate resistance before 1.2560 (200-day SMA). Supports are located at 1.2450 – 1.2440 (Fibonacci 23.6% retracement, 50-period SMA) and 1.2400 (psychological level, static level).

In today’s analysis of GBP/USD, the current price stands at $1.25067, reflecting a decrease of 0.05%. Assessing the 4-hour chart, pivotal price levels are identified, with the pivot point set at $1.25228. Immediate resistance levels are observed at $1.25786, $1.26401, and $1.27087, while immediate support lies at $1.24260, followed by $1.23656 and $1.23023.

Technical indicators, including the 50-day Exponential Moving Average (EMA) at $1.24606 and the 200-day EMA at $1.25545, offer additional insights into market trends. With a bearish sentiment prevailing below $1.25228, a breakout above this level could signify a shift towards a more bullish bias, and vice versa.

For a look at all of today’s economic events, check out our economic calendar.

US Economic Calendar: Personal Income and Expenditures Report

Later in the Friday session, the US Personal Income and Expenditure Report warrants investor attention.

Economists forecast personal income and spending to increase by 0.5% and 0.6% in March, respectively. Personal income and spending rose by 0.3% and 0.8% in February.

Moreover, economists expect the Core PCE Price Index to increase 2.6% year-on-year in March. In February, the Core PCE Price Index rose by 2.8% year-on-year.

Upward personal income/spending trends and sticky inflation could reduce investor bets on multiple 2024 Fed rate cuts. Higher wages would increase disposable income. Upward trends in disposable income could fuel consumer spending and demand-driven inflation. A higher-for-longer Fed rate path could raise borrowing costs and reduce disposable income.

Other US economic indicators include pending home sales and finalized Michigan Sentiment numbers. A market revision to the preliminary Michigan Consumer Sentiment and Inflation Expectations Indexes could move the dial.

Short-term Forecast

Near-term trends for the USD/JPY hinge on the Bank of Japan and the US Personal Income and Expenditures Report. A hotter-than-expected US Personal Income and Expenditures Report could tilt monetary policy divergence toward the US dollar. However, investors should also consider the Bank of Japan press conference.

USD/JPY Price Action

Daily Chart

The USD/JPY hovered comfortably above the 50-day and 200-day EMAs, affirming the bullish price signals.

A USD/JPY breakout from the April 25 high of 155.747 would give the bulls a run at the 156 handle.

Investors should consider the Bank of Japan press conference and the US Personal Income and Expenditures Report.

Conversely, a USD/JPY fall through the 155 handle could signal a drop toward the 50-day EMA and the 151.685 support level. Buying pressure may intensify at the 151.685 support level. The 50-day EMA is confluent with the support level.

The 14-day RSI at 79.13 shows the USD/JPY in overbought territory. Selling pressure may increase at the April 25 high of 155.747.

Australian Dollar vs US Dollar Technical Analysis

The Aussie dollar rallied rather significantly during the early hours on Thursday, but we are starting to see a little bit of a push back at this point as the 50 day EMA comes into the picture to offer a little bit of resistance. All things being equal, I think this is a situation where the Aussie is just heading to the middle of consolidation overall, and as a result, I’m not overly excited.

One way or the other, the 50 day EMA and the 200 day EMA are both indicators that could offer a bit of resistance. That being said, if we do rollover from here, then it’s very likely that we go looking toward the 0.6450 level. The 0.6450 level is an area that’s previously been important, so it does make a bit of a target.

On the upside, if we were to break above the 200 day EMA, then it opens up the possibility of moving to the 0.6650 level. Expect a lot of noisy volatility, which is nothing new for these markets recently. So I think at this point in time, you have to look at this as a potential selling opportunity. And it certainly looks as if it is starting to roll over again.

But I would also say that if we break above the 200 day EMA, it would smash through this weakness. And that of course would be a very bullish sign. But in the short term, I think this is a market that just continues to be very choppy with a little bit of an easier path lower, I think more than anything else.

For a look at all of today’s economic events, check out our economic calendar.

This article was originally posted on FX Empire

More From FXEMPIRE:

• EUR/USD rose to a new two-week high around 1.0740.
• Advanced US Q1 GDP came in short of estimates.
• Markets’ attention now shifts to the upcoming US PCE.

The renewed downside momentum of the US Dollar (USD) prompted a decent reaction in EUR/USD on Thursday, extending the recent recovery to the 1.0740 region, or two-week tops.

The Dollar’s downswing followed the unexpected miss in the first estimate of the Q1 GDP Growth Rate despite quarterly inflation tracked by the GDP deflator rising above consensus, all kicking back a potential interest rate cut by the Federal Reserve (Fed) for later in the year.

The renewed weakness in the Greenback coincided with an increase to fresh multi-month tops in US yields across different time frames against the backdrop of a consistent narrative highlighting the divergence in monetary policies between the Fed and other G10 central banks, notably the European Central Bank (ECB).

Recent comments from ECB board members have hinted at the ECB initiating its easing cycle in June, with speculation swirling about three interest rate cuts (or 75 bps) for the rest of the year. Conversely, bets on the Fed’s rate cut in September seem to have lost momentum ahead of the release of key PCE prints on Friday.

Looking ahead, the relatively subdued economic fundamentals in the Eurozone, coupled with the resilience of the US economy, bolster expectations for a stronger Dollar in the medium term, particularly considering the likelihood of the ECB cutting rates before the Fed. In such a scenario, EUR/USD is anticipated to undergo a more significant decline in the short term.

EUR/USD daily chart

EUR/USD short-term technical outlook

On the upside, EUR/USD is expected to face first resistance at the critical 200-day SMA of 1.0807, seconded by the April peak of 1.0885 (April 9), the March high of 1.0981 (March 8), and the weekly top of 1.0998 (January 11), all before reaching the psychological barrier of 1.1000.

Looking south, the breach of the 2024 low of 1.0601 (April 16) may indicate a return to the November 2023 low of 1.0516 (November 1), which precedes the weekly low of 1.0495 (October 13, 2023). Once this region is achieved, a visit to the 2023 bottom of 1.0448 (October 3) may occur before the round milestone of 1.0400.

The 4-hour chart shows that the bullish trend is still in place. The initial up-barrier is at 1.0740, ahead of 1.0756 and the 200-SMA at 1.0787. Meanwhile, the initial support is the 55-SMA at 1.0661 prior to 1.0601 and followed by 1.0516. The Relative Strength Index (RSI) climbed past 63.

• EUR/USD rose to a new two-week high around 1.0740.
• Advanced US Q1 GDP came in short of estimates.
• Markets’ attention now shifts to the upcoming US PCE.

The renewed downside momentum of the US Dollar (USD) prompted a decent reaction in EUR/USD on Thursday, extending the recent recovery to the 1.0740 region, or two-week tops.

The Dollar’s downswing followed the unexpected miss in the first estimate of the Q1 GDP Growth Rate despite quarterly inflation tracked by the GDP deflator rising above consensus, all kicking back a potential interest rate cut by the Federal Reserve (Fed) for later in the year.

The renewed weakness in the Greenback coincided with an increase to fresh multi-month tops in US yields across different time frames against the backdrop of a consistent narrative highlighting the divergence in monetary policies between the Fed and other G10 central banks, notably the European Central Bank (ECB).

Recent comments from ECB board members have hinted at the ECB initiating its easing cycle in June, with speculation swirling about three interest rate cuts (or 75 bps) for the rest of the year. Conversely, bets on the Fed’s rate cut in September seem to have lost momentum ahead of the release of key PCE prints on Friday.

Looking ahead, the relatively subdued economic fundamentals in the Eurozone, coupled with the resilience of the US economy, bolster expectations for a stronger Dollar in the medium term, particularly considering the likelihood of the ECB cutting rates before the Fed. In such a scenario, EUR/USD is anticipated to undergo a more significant decline in the short term.

EUR/USD daily chart

EUR/USD short-term technical outlook

On the upside, EUR/USD is expected to face first resistance at the critical 200-day SMA of 1.0807, seconded by the April peak of 1.0885 (April 9), the March high of 1.0981 (March 8), and the weekly top of 1.0998 (January 11), all before reaching the psychological barrier of 1.1000.

Looking south, the breach of the 2024 low of 1.0601 (April 16) may indicate a return to the November 2023 low of 1.0516 (November 1), which precedes the weekly low of 1.0495 (October 13, 2023). Once this region is achieved, a visit to the 2023 bottom of 1.0448 (October 3) may occur before the round milestone of 1.0400.

The 4-hour chart shows that the bullish trend is still in place. The initial up-barrier is at 1.0740, ahead of 1.0756 and the 200-SMA at 1.0787. Meanwhile, the initial support is the 55-SMA at 1.0661 prior to 1.0601 and followed by 1.0516. The Relative Strength Index (RSI) climbed past 63.

Potential signal:

This trade setup is different: If the USD/JPY can close above 155.33 on a daily candlestick, I will buy this pair with a 150 pip stop loss, and a target of 400 pips.

The British pound initially pulled back against the Japanese yen during early hours on Wednesday, as we continued to threaten a major breakout. Quite frankly, the British pound itself isn’t necessarily strong, it’s just that the Japanese yen is that horribly weak. This is going to be a very pivotal week because Friday we have the Bank of Japan meeting and that, of course, is going to have a major influence on where we go next.

• 

The Japanese may try to jawbone down some of the yen related pairs, but really at this point there isn’t a whole lot that they can do because if they raise interest rates, it will absolutely destroy the bond market in Japan. This is what happens when the local central bank is the only buyer of bonds. That’s generally how it’s been for years.

The Japanese Might Be Stuck

With that being the case, they are stuck. They may get some help from other central banks, and we may see an intervention, but that intervention is going to end up being a buying opportunity. As things stand right now, the ¥194 level was the recent high or somewhere just below it. And we have significant support underneath the 50 day EMA, which hangs around the ¥191 level and is in a nice 45 degree slope higher.

Ultimately, I like this pair. I’ve been hanging on to it for a while and have enjoyed quite a bit of profit from the end of day swap. With this, I do think eventually we go higher, but the question is whether or not we pull back and find value or if we just simply take off. I think Friday will be the final answer. While it certainly looks as if it is a very bullish market in general, I think that at this point in time, people are looking at this through the prism of the next major hurdle to overcome. If we see the Japanese flinch, which they have been known to do, this pair will shoot straight up in the air. Furthermore, pay attention to the USD/JPY pair, because if we can break above resistance there, that will put upward pressure here as well.

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• According to recent trading activity, the British pound sterling against the US dollar (GBP/USD) has been on the rise, easing some recent selling pressure.
• However, the bigger picture remains consistent with ongoing weakness. According to forex trading platforms, the GBP/USD exchange rate has risen towards the resistance level of 1.2470, hovering near it at the start of Thursday’s session, which includes significant US economic releases such as GDP growth rate and weekly jobless claims announcements, along with anticipated US home sales.

Midway through this week’s trading, the British pound sterling recovered from losses that brought it to the support level of 1.2300, its lowest in five months. The pound’s gains were fueled by a stronger-than-expected UK Purchasing Managers’ Index (PMI) report, showing an accelerated economic recovery in April. Additionally, a key Bank of England official’s speech tempered recent market expectations of imminent interest rate cuts.

Bank of England Chief Economist Hugh Bell warned that the bank’s stance on UK interest rates remains unchanged, cautioning against overly early monetary policy easing and emphasizing the risk of doing so too late.

Meanwhile, the US dollar remained under pressure following a weaker-than-expected US Purchasing Managers’ Index (PMI), marking its lowest levels in four months, boosting hopes that the US inflation downtrend has not completely dissipated. Consequently, market analysts noted, “Markets have softened slightly on the mixed policy outlook that propelled the US dollar higher this year. While there is ample evidence that the US economy continues to outperform its global counterparts, Standard & Poor’s Global business activity data recently released shows slowing activity in the United States. It expanded in April at the slowest pace in four months.”

Following the data, financial market pricing indicates investors now foresee two interest rate cuts by the US Federal Reserve this year, leading to declines in US yields and the US dollar. Analysts added, “GBP/USD has rebounded more than one cent from its five-month low of $1.23, although it remains stuck in the downward trend channel since mid-March.”

• 

Ultimately, the outcome of expectations for US interest rate cuts will determine the direction of the dollar, as most analysts caution against further strength. An analysis conducted by ING Bank suggests that further weakness in the pound sterling in the near term is indeed a risk. Chris Turner, a currency analysis expert at ING Bank, anticipates that the greater divergence in interest rate cycles between the Bank of England and the US Federal Reserve will have a “particular impact on the GBP/USD pair.”

The Bank of England is expected to cut interest rates in June or August before the US Federal Reserve does so. Therefore, Joseph Capurso, an analyst at Commonwealth Bank, suggests that some market analysts are now discussing the possibility of the US Federal Reserve raising interest rates again after a long period of stability. Furthermore, the US Federal Reserve still expects the next move to be a cut, but it warns that if it raises interest rates, it will do so at least twice.

ING Bank analysts further added that more decline in interest rate differentials between the US and Britain, due to increased bets on interest rate cuts from the Bank of England, will lead to further weakness in the pound sterling against the dollar.

Technical forecasts for the GBP/USD pair today:

The GBP/USD price has now risen to trade at a few levels above the 100-hour moving average line. As a result, the currency pair appears to be approaching overbought levels of the RSI on the 14-hour frame. In the near term, and according to the performance on the hourly chart, the GBP/USD pair is trading within an ascending channel formation. Also, the RSI on the 14-hour frame appears to be supporting the upside trend in the short term as it approaches overbought levels. Therefore, the bulls will look to ride the current rally towards 1.2479 or higher to the 1.2503 resistance. On the other hand, the bears will target potential pullbacks at around 1.2420 or lower at the 1.2400 support.

In the long term, and according to the performance on the daily chart, it appears that the GBP/USD currency pair is trading within a descending channel. However, the 14-day RSI has been bouncing recently to avoid falling into oversold levels. Therefore, the bulls will target extended bounces at around 1.2566 or higher at 1.2680 resistance. On the other hand, the bears will look to extend current declines towards 1.2343 or lower to 1.2200 support.

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• The Japanese yen witnessed further weakness against its counterpart, the US dollar, falling to its lowest level in over three decades.
• According to forex trading platforms, the Japanese yen has faced immense pressure this year, even as the Bank of Japan raised interest rates for the first time since 2007 and economic outlook improved.
• Technically, the USD/JPY exchange rate breached the psychological resistance level of 155.00, reaching gains up to 155.37 before settling around 155.20 at the time of analysis ahead of important US data announcements.

Commenting on the performance of currency rates, former US President Donald Trump described the rise in the price of the US dollar as a “complete disaster” for the US economy, arguing that it affects US manufacturing companies and other companies participating in the global market through the export of goods and services. For his part, the presumptive Republican nominee wrote on the Truth Social website: “It sounds good for the idiots, but it is a disaster for our manufacturers and others.” Added, “They are actually unable to compete and will either have to lose a lot of business, or build factories, or something.” Another, in “smart” countries. Obviously, this is what made Japan and China giants years ago.

• 

In general, a lower-valued currency, such as the Japanese yen, benefits companies that export products and tourists who visit Japan. However, this is a terrible development for businesses and households because import costs are higher. US officials have ostensibly given the green light for Japan to intervene in global forex markets and support the yen. In this regard, US Treasury Secretary Janet Yellen said in a statement: “We will also continue to consult closely on foreign exchange market developments in line with our existing G20 commitments, while recognizing the serious concerns of Japan and the Republic of Korea regarding the recent sharp decline in the value of the Japanese yen and the Korean won.”

Meanwhile, Japanese officials have indicated they plan to act, the government and central bank have not specified what measures they could take.

In terms of economic data, according to the results of the economic calendar data, manufacturing in Japan improved in April, with the Jibun Bank Manufacturing Purchasing Managers’ Index rising to 49.9, up from 48.2 in March and higher than the consensus estimates of 48. Any reading below 50 indicates contraction. Also, services and the composite Purchasing Managers’ Index improved this month, rising to 54.6 and 52.6, respectively.

USD/JPY Technical analysis and Expectations Today:

The general trend of the price of the US dollar against the Japanese yen (USD/JPY) is still bullish, and its successive record gains have moved all the technical indicators towards strong overbought levels. Currently, we still prefer selling the dollar against the Japanese yen from its gains above the 155.00 resistance, but without risk, considering that Japanese intervention in the markets It is very imminent and may happen at any moment, and therefore the currency pair may be exposed to strong selling operations to take profits, with the trend quickly turning to the downside. Also, the USD/JPY currency pair will be affected by the announcement of the US economic growth reading and then the US inflation reading, which is preferred by the US Federal Reserve.

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• After gains this week, the EUR/USD exchange rate is expected to be better protected against further weakness, as a key German survey showed that the economy may have weathered a tough phase.
• The rebounding trend for the EUR/USD exchange rate towards the resistance level of 1.0715 before settling around 1.0685 at the time of writing, awaits new factors of strength instead of returning to the broader downtrend.

Carsten Brzeski, an analyst at ING Bank, commented on the results of the April Ifo index, Germany’s leading indicator: “Germany seems to be at a cyclical turning point.” According to the Ifo data, the current assessment came in at 88.9 in April, up from 88.1 and higher than the expected 88.7. Recently, the Ifo expectations component was up at 89.9, rising from 87.7 and beating the expected 88.9. Brzeski added, “Based on previous experiences, three consecutive increases tend to be a turning point in the economy.”

According to forex trading platforms, the EUR/USD exchange rate has recovered this week, with analysts suggesting that German economic data will support technical support levels. In this regard, Jeremy Bolton, an analyst at Reuters, said, “Euro short sellers have reason to look for more support.” Overall, the developments will instil confidence for those looking to enter euro short positions against the US dollar in 2024. Derek Halpenny, Head of Currency, and Gold Analysis at MUFG Bank, stated, “Even moderate better growth in Europe is likely to curb the dollar’s rise in the future.”

Samer Hassan, market analyst at XS.com, noted that renewed optimism about the German economy has pushed the yield on 10-year German bonds to its highest opening level since last November. He added, “This change in expectations about monetary policy, along with the return to economic activity, helps to narrow the yield gap between US Treasury bonds and German bonds, which will limit the impact of sharp rises in US yields on the euro.”

• 

Meanwhile, the exchange rate of the euro against the US dollar was under pressure in April, and fell to a low level of 1.0601, its lowest in more than five months, as markets reduced their bets on US interest rate cuts and strengthened the yield advantage on US bonds. Any slowdown in US bond yields and a rise in Eurozone bond yields will support the euro against the dollar as the yield spread begins to close again.

For its part, ING Bank says that the difficult economic data for the first two months of this quarter already indicates that Germany could have emerged from the recession earlier than expected. The bank’s analyst added: “Strong activity in the construction sector against the backdrop of mild winter weather and a technical recovery in commercial and industrial production were supposed to compensate for weak private consumption. “It appears that this cyclical recovery will continue in the second quarter.”

According to Forex currency market trading, the euro exchange rate rose against the US dollar in the middle of the week’s trading, after the release of the purchasing managers’ index reading for abundant German services, which cast a shadow over another disappointment in the manufacturing sector. According to the advertiser, Europe’s largest economy recorded a significant rise in service sector production, as the Services Purchasing Managers’ Index rose to 53.3 in April, exceeding expectations (50.6) and 50.1 in March.

For its part, Standard & Poor’s, the global agency that produces the Purchasing Managers’ Index report, said: “The German private sector returned to growth at the beginning of the second quarter.” Although manufacturing was disappointing (42.2 vs. 42.8 expected), the explosion in services was enough to push the composite PMI into growth territory at 50.5, well above expectations of 48.6.

EUR/USD Technical analysis and forecast:

The price of the EUR/USD currency pair continues to trade at a few levels above the 100-hour moving average line. As a result, the currency pair appears to have plenty of room to move either side of the 14-hour RSI before entering overbought or oversold conditions. In the near term, and according to the performance on the hourly chart, it appears that the EUR/USD currency pair is trading within a sideways channel formation. Also, the 14-hour RSI appears to support sideways movement, leaving plenty of room on either side of the curve. Therefore, the bulls will target potential upside profits at around 1.0717 or higher at the 1.0743 resistance. On the other hand, the bears will look to pounce on pullbacks at around 1.0669 or lower at the 1.0640 support.

In the long term, and according to the performance on the daily chart, it appears that the EUR/USD currency pair is trading within a descending channel. However, the 14-day RSI has rebounded recently to avoid entering oversold levels. Therefore, the bulls will target extended bounce profits at around 1.0779 or higher at 1.0880 resistance. Ultimately, the bears will look to pounce on profits at around 1.0610 or lower at the psychological support of 1.0500.

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The Japanese Yen has remained under pressure in global markets with the USD/JPY exchange rate surging to fresh 34-year highs at 155.75 with no Bank of Japan (BoJ) intervention to support the currency.

The Pound to Yen (GBP/JPY) exchange rate also posted 8-year highs above the 194.00 level.

According to MUFG; “Apart from the risk of FX intervention and the yen being deeply undervalued, there seem to be no other major drivers to reverse the USDJPY uptrend for now. Japan’s real policy rate is negative, despite the exit from negative interest rate last month.”

It added; “And we expect the BOJ to stand pat at its upcoming meeting. The yen has also lost its appeal as a safe-haven currency, with a recent rise in geopolitical tensions not helping the yen.”

Markets will still be on high alert in the short term, especially with the BoJ policy decision on Friday.

Traders had speculated that there would be a defence of the 155 level, but there has been no action so far.

According to Chief cabinet secretary Hayashi, rapid FX moves are undesirable and it is ready for a full response.

He added that he expects BOJ to conduct appropriate monetary policy to sustainably and the government is working closely with the central bank.

Chief Cabinet Secretary Yoshimasa Hayashi added; “It’s important for currency rates to move stably reflecting fundamentals. Excessive volatility is undesirable.”

According to Jayati Bharadwaj, global FX strategist, at TD Securities; “The move in dollar/yen has been in line with what’s happening with the broad dollar re-assessment. It’s not being driven by BOJ (Bank of Japan) speculation, which it was at one point last year, but a broad dollar move backed by fundamentals.”

She added; “I don’t think there’s specific number that the BOJ is keeping in mind. It would have to be the magnitude of the move.”

The BoJ is not expected to change policy at this meeting after the move to end negative interest rates at the March meeting.

There will, however, be pressure on Governor Ueda to adopt a more hawkish stance given the fresh bout of yen weakness.

According to Rabobank; “If the BoJ is judged by the market as lacking any hawkish signals, downside pressure in the JPY would likely increase suggesting more pressure on the MoF to put its money where its mouth is.

At this stage, Rabobank has a September USD/JPY forecast of 148 as the Federal Reserve cuts interest rates.