USD/JPY sharp dip as prices reach 160

Technical Analysis of USD/JPY:

USD/JPY has demonstrated heightened volatility, oscillating within a wide range of 155.15-160.20, accentuated by the public holiday in Tokyo. This erratic movement has been marked by a swift rise from 158.60 to 160.20, before retreating sharply back to around 159.20. The climb above the key psychological level of 160.00, was met with the activation of stop-loss orders and option structures, contributing to the volatility.

The pair experienced a significant pullback, descending from 159.50 to a low of 155.02, influenced by the Bank of Japan’s yen purchasing actions, suggesting a potential sustained intervention. The support level has been established at Friday’s low of 154.91, while the resistance is pegged at the intraday high of 160.20.

The prevalent short positions against the yen indicate a market leaning towards yen weakness; however, the recent intervention could induce a temporary reversal in this trend. Despite the intervention, the underlying fundamentals, such as the unlikely near-term rate cuts by the Federal Reserve and favorable yield spreads, suggest a propensity for buying USD on dips.

Market Sentiments:

Positive: 40%
Negative: 30%
Neutral: 30%

The sentiment displays a mixed perspective, with a tilt towards positivity stemming from the robust carry trade appeal of the USD. However, the potential for further intervention by the Bank of Japan instills a degree of caution, maintaining a significant portion of the sentiment in the negative and neutral territories. The likelihood of dip-buying behavior underscores the positive sentiment, contingent on the alignment of yield spreads with USD strength.

Key Levels to Watch: : 155,156,160,158