Price Action on USD/JPY, GBP/JPY (null:USD:JPY)

By Zain Vawda

Basic overview

The Japanese yen is having a great week, thanks in part to optimism about wage growth and increasing optimism from the US Federal Reserve about rate cuts. The yen rally has sparked speculation among Japanese authorities about a possible intervention, but there was no confirmation as to whether or not an intervention took place.

Earlier in the day, the release of the latest data from the Bank of Japan (BoJ) did not reveal any immediate signs of intervention. According to Kazushige Kamiyama, a senior Bank of Japan (BoJ) official and head of the central bank’s Osaka branch, the BoJ wants to maintain an easy monetary policy environment as much as possible.

Money market data from last week suggested that the authorities bought up to 6 trillion yen last week. This, together with the continued strength of the JPY, has led to a rise in the belief of market participants that interventions also occurred this week.

Japanese Yen Currency Index

Technical Analysis

USD/JPY

USD/JPY has broken the long-term downtrend line that has been in place since December 2023. However, the pair seems to have found support, ending just below the 100-day MA and the key support area at 155.00.

In theory, a break of the trend line should lead to further downside, especially given the growing optimism about rate cuts in the US. Historically, however, even when the Bank of Japan (BoJ) has intervened in the foreign exchange market, rapid gains in the yen have often been quickly wiped out.

Of course, past performance is no guarantee of future results. Key resistance levels to watch include the 157,800 level, which is closely related to the trendline break. A retest and subsequent rejection of this level could signal further downside.

Alternatively, a daily candle close above the 158,450 level will result in a structural shift and likely give the bulls back the lead.

Support

• 155.00 (100-day MA)
• 153.59
• 152.00

Resistance

USD/JPY daily chart, July 18, 2024

GBP/USD

Looking at GBP/JPY, the daily chart almost mirrors USD/JPY. This is not surprising as the overarching narrative was more about JPY weakness than other currencies appreciating.

Dropping back to a H4 time frame, we have a descending trendline that comes into focus and could cap further gains. A break above this trendline could face the 100-day MA at 204.945, with the next area of ​​focus at 206.00.

Alternatively, a rejection of the 100-day MA or trend line must first overcome the 200-day MA, which acted as support for the GBP/JPY pair overnight. A break of this support could eventually allow a downward move towards the psychological level of 200.00.

GBP/JPY daily chart, July 18, 2024

Support

Resistance

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