USD/JPY 240 Minute Chart Analysis – 2023-10-18

USD/JPY has been gradually edging higher, approaching its 2023 highs, even as US yields surged following strong economic data. Despite substantial jumps of 13 and 14 basis points in 2-year and 10-year US Treasury yields, respectively, the rise in USD/JPY has been relatively mild. The pair has encountered resistance near October’s peak of 150.165, which is part of the broader range that capped its uptrend since October 3rd. A flash dip to 149.75-8.75 earlier this week serves as a reminder of market skittishness, especially as the Bank of Japan is seen slowly moving away from its ultra-easy monetary policy stance. Additionally, the lingering threat of FX intervention by Japan’s Ministry of Finance looms. There’s a series of Federal Reserve speakers scheduled, including Chair Powell later this week. While the Fed funds curve has shown a slight rise in the probability of a December rate hike, it is mostly pricing out some mid-year and 2024 rate cuts. The rising channel top from 2023 intersects with the 2022 peak at 151.94 on Wednesday, adding significance to that level. Key support can be found at the Kijun level of 148.30.

USD/JPY remains somewhat heavy as it approaches the 150 level, with mixed performance observed in JPY crosses. Japanese exporters, option players, and others are positioned on the topside, while importers are looking to buy on dips. Recent volatility, including a drop to 148.75 driven by Bloomberg reports related to the Bank of Japan, has contributed to the market’s cautious sentiment.  In terms of risk sentiment, the Asian markets are exhibiting mixed sentiment, with the Nikkei down 0.2% at 31,974 during the Tokyo Stock Exchange’s morning session.

From a technical perspective, USD/JPY is currently trading at the 149.650 level. The price is positioned above the 50-day and 200-day Moving Averages, suggesting a bullish range momentum. In Scenario 1, the price could continue to rise, potentially retesting the 149.824 level. Should bullish momentum persist, further advances might test the 150.306 level, which corresponds to the top of resistance level 1. Significant resistance levels are situated at 150.764 and 151. Conversely, in Scenario 2, the price may decline, testing support levels at 149.363, 149.250, and 148.913. A successful test at these levels could lead to further downward movement towards the 148.404 level, followed by subsequent support levels at 148.112 and 147.832. While the market exhibits bullish range momentum, the possibility of a pullback from previous highs suggests an oversold condition, with the Relative Strength Index (RSI) nearing the oversold region.