American dollar/JPY price and planning Analytics
- The Bank of Japan is buying Japanese government bonds again.
- The USD/JPY line is approaching 130.00 “in the sand”.
- Retailers are short and get caught.
The Bank of Japan (BoJ) is back in the market and buying an unlimited amount of government bonds to keep the 10-year Japanese government bond yields below 0.25% in another attempt to restart the ailing economy. As other countries look to reduce their balance sheets (quantitative tightening), the Bank of Japan continues to pump money into the economy, further diverging from other major global central banks.
Japan’s loose monetary policy, exacerbated by the third round of bond buying, continues to weigh on the Japanese yen, further weakening it across the board. The BoJ will intervene at some point to try to mitigate the losses of the yen but the question is at what level and with what commitment. At the beginning of this month, the $125.00/JPY level was seen as a ‘line in the sand’ which if crossed would trigger BoJ intervention, mainly verbally. That level, there or near, has been there for almost two decades and finally dropped this month. It is now likely that 130.00 will become the next market for the BoJ to have already warned of sharp moves in the currency. It remains to be seen how the BoJ can prevent the yen from falling further while injecting money into the economy by buying government debt at the same time.
The USD/JPY pair shows a 15-month rally in the USD/JPY and the ease with which the pair took out previous monthly resistances at 118.66 and 123.75 before ignoring 125.00. Now the last two areas are likely to become support, especially with the Bank of Japan buying bonds, leaving 130.00 as the next target. If this is broken conclusively, and that could be difficult in the short term, then 135.20 becomes the next downside area.
USD/JPY Monthly Price Chart – April 20, 2022
Retail traders are having a hard time with the USD/JPY pair with the latest data showing a strong, increasing, and short bias. Retailer data show 26.82% of traders are net long with the ratio of short to long traders at 2.73 to 1. The number of long traders is 10.93% higher than yesterday and 26.11% higher than last week, while the number of short traders is up 5.76% compared to yesterday and 2.25% higher than last week.
We usually take a conflicting view with crowd sentiment, and the fact that traders are shorts indicates that USD/JPY prices may continue to rise. However, traders are net less than yesterday and compared to last week. Recent changes in sentiment warn that the current The USD/JPY price trend may reverse downwards soon despite the fact that the traders are still net.
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