The recent release of a summary of opinions by the Bank of Japan (BoJ) has caused a stir in the market, with accompanying bearish comments from BoJ policymakers. The BoJ projects reaching the inflation target by the second half of 2025, setting an intriguing scenario for market participants and potentially positioning the Yen strongly next year.
Geopolitical concerns could bolster the Yen’s position in the market, with its safe haven appeal potentially dividing among the US Dollar, Yen, and Swiss Franc. This could lead to negative Yen gains against the Dollar but benefitting against the Euro and GBP.
From a technical perspective, USD/JPY has rebounded and formed an imperfect morning star candlestick pattern. While this typically signals a bullish move, various factors need to be considered. The H4 chart displays higher highs and higher lows, suggesting a potential return to the 150.00 level. However, a close below the recent lower swing high could invalidate the bullish outlook and drive the Yen towards retesting the 140.00 level.
GBP/JPY mirrors the USD/JPY chart, trading above the support level at 185.00. The H4 chart shows a similar pattern with higher highs and higher lows, indicating bullish momentum. However, a close below 183.30 could invalidate the structure and lead to a retest of recent lows towards the 175.00 level. Resistance levels are found at 187.65 and 190.00.
The EUR/JPY chart reflects similar trends seen in USD/JPY and GBP/JPY, with an imperfect morning star candlestick pattern on the daily chart. A retest of the support area around 159.00 level occurred before bouncing back to trade at 159.66. A close below the recent lower swing high at 157.50 could invalidate the bullish trend, potentially leading to a retest of recent lows around 154.40. Resistance levels are found at 160.00 and 161.86.
The market trends influencing the Yen are a complex interplay of economic indicators, geopolitical concerns, and technical analysis. While the BoJ’s projection of reaching the inflation target by 2025 presents an interesting scenario, geopolitical tensions and technical indicators could sway the Yen’s position in the market. Traders and investors must carefully analyze these factors to make informed decisions in the currency market.