Expectations from the USD/JPY for the end of April – early May

The USD/JPY currency pair was trading in the flat near the psychological level of 112.00 all week (from April 15 to April 18). The reason for this movement were several fundamental and technical factors. It should be noted in advance that the dynamics of the Japanese yen was upward in most of the crosses during the current week.

The limiting factor of the movement of the USD/JPY pair throughout the week was the uncertainty before the long weekend from April 19 to April 22. During this period, market activity will be reduced due to the weekend in a number of Catholic countries. On the one hand, this was supposed to push the volatility to increase for this pair, as it was for the dollar index. But, due to the expectations of the Bank of Japan meeting results and equally weak statistics for Japan and the USA, the dynamics of this pair were limited.

Fig. 1. The US dollar index chart

It is also worth noting that the Bank of Japan likes to often resort to verbal interventions. And the upcoming meeting of the Central Bank of Japan is probably not an exception. Especially of the overall dynamics of mitigating forecasts for the growth of large world economies and hints of incentives.

The technical factor of this movement was the technical correction, after the growth a week earlier. As a result, USD/JPY was not able to overcome the level of 112.00, but was not under any noticeable pressure either. The limiting factor in the decline of this pair was the increase in the  US state bonds yield and the rising dynamics of stock indices, mainly DOW 30.

Fig. 2. DOW 30 index chart (blue line – the US state bond yield)

Expectations from the USD/JPY for late April – early May

In the conditions of the preservation of the upward dynamics and the positive dynamics of the US economy, we can expect the pair to grow and break through the resistance of 112.00-20. It will indicate continued growth and further test of resistance levels of 112.60 and 113.00.

A limiting factor may be a more significant correction of the US currency after the rapid growth on Thursday (April 18) and the neutral position of the Bank of Japan (which will meet on April 25). This may cause the pair’s decline to support levels: 111.60-40. Despite the slowdown in upward dynamics, the potential for growth will remain, but will be limited to psychology 112.00.

Updating the April lows at 111.00-110.90 will cast doubt on the entire uptrend of 2019. However, such a development is extremely unlikely in the existing dynamics of the stock market and the US dollar.

Anton Hanzenko