JPY: Still holding below key technical resistance – MUFG

Lee Hardman, Currency Analyst at MUFG, notes that the yen has strengthened in the Asian trading session with USD/JPY once again testing and failing to sustain gains above key technical resistance at just over the 110.00-level where both the 55-day moving average and bottom of the Ichimoku cloud is located.

Key Quotes

“The pair has held below both the 55-day moving average and Ichimoku cloud since late last year which marked the start of the recent down trend. From this perspective, USD/JPY appears to be at a key technical juncture in the near-term. Downward pressure on USD/JPY has clearly eased since early in April which should please Japanese policymakers who had previously voiced concerns over rapid and one sided yen price action earlier this year.

An FT article based on an interview from the 16th May with Masatsugu Asakawa, who is the vice-minister of finance for international affairs, has grabbed some market attention overnight. The report was entitled “Yen intervention will stay in the toolbox”. It may have initially prompted some misunderstanding amongst market participants as the interview does not imply that Japan will not use intervention.

Rather in the interview, Mr Asakawa defended Japan’s ability to intervene in the currency if required to combat excessive and disorderly movements in the yen which would have an “adverse impact on economic stability”. The report stated that Mr Asakawa appeared keen to intimate that intervention might be used only to slowdown a sharp appreciation of the yen rather than to defend a particular level. Overall, we do not believe that there was anything in the report that changed our assessment that direct intervention remains unlikely in the near-term.”