JPY Rallying

The Japanese Yen is starting the week on a stronger footing following hawkish comments from BOJ governor Ueda to the Yomiuri newspaper. Ueda signalled that the bank would likely have enough information by year end to determine whether wages would continue to rise. The bank has previously cited this as key in deciding upon its monetary policy going forward. Traders have taken these comments as a sign that the BOJ is preparing to shift policy as we moved into 2024.

Verbal Intervention

On the back of the heavy depreciation we’ve seen in the Yen over recent months, there has been growing speculation over potential BOJ intervention. Last year the bank was seen selling USD heavily to drive the USDJPY rate lower from around 145. As such, these comments have been viewed as potential verbal intervention to help drive JPY higher without the need for similar action this time around.

Policy Shift on the Horizon

The prospect of a shift in BOJ policy has taken on greater focus since the bank recently widened the scope of its YCC target. Many saw this as a precursor to greater action and several BOJ members have cited the potential need for a change in policy across 2024. While this narrative continues to develop, JPY looks vulnerable to upside risks.

Technical Views

USDJPY

The rally in USDJPY has stalled for now into the bull channel highs. Bearish divergence in momentum studies suggests risk for a deeper correction lower near-term. If bears break back below the 145.00 level, 142.21 will be the next support to watch, ahead of the bull channel lows and 138.03 level below.