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Fundamentals

On Thursday (June 22), during the Asian session, the USDJPY fluctuated within a narrow range. At present, it traded around 141.8. Yesterday, the overall market fluctuated relatively little, mainly following the U.S. Dollar Index (USDX). After Powell's speech, the USD rebounded slightly, and USDJPY rose to around 142.4, the highest level since November 2022.Then, after two other Fed officials made dovish remarks, the USDX dropped sharply, and USDJPY also fell to around 141.6 and rebounded slightly. From the overall trend, the USDJPY is still in an upward channel and relatively complete. Although the USD has weakened, it may not hinder its exchange rate's relative strength.

Overall: The yield spread of U.S. and Japanese government bonds may rise further. Powell's testimony shows that policymakers are still firm in their determination to restore price stability and will soon restart raising interest rates after a short slowdown.In the second half of 2023, the possibility that the upper limit of the Fed's target interest rate range rises to 5.75% may further increase the U.S. Securities yields. After the Bank of Japan (BOJ) strengthened its ultra-loose monetary policy stance at the June meeting, it still shows no signs of giving up its expansionary policy will, and the JPY may remain weak. Once the USD stabilizes in the later period, it will further aggravate the weakness of theJPY.

Risk point of concern: If the JPY continues to depreciate rapidly beyond the tolerance of the Japanese authorities, it may intervene in the foreign exchange market to curb excessive speculation on theJPY.Last year, when USDJPY exceeded 146.00 and 152.00, the Japanese government intervened in the foreign exchange market by selling USD. Investors in this position can pay attention to the potential intervention risks if this happens again. However, it is worth mentioning that the ability of the BOJ to intervene has been weakening.

Technical Analysis

In the 1D timeframe: With USDJPY breaking the upper limit of the symmetrical triangle, more upside is opened.However, USDJPY will soon see key technical resistance (142.50), which is a resistance area consisting of the 61.8% Fibonacci retracement level as well as the previous highs.If it can hold that position, it could hit the high of 145. If it is stopped and falls back, the initial support level will be around 140.50, which is the support range turned after the previous resistance was broken. If it loses further ground, the decline could extend to around 138.60.

Trading Recommendations

Trading direction: Long

Entry price: 141.8

Target price: 145.0

Stop loss: 138.6

Support: 140.500, 138.500

Resistance: 145.000, 152.000