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Daily Pivots: (S1) 156.06; (P) 157.26; (R1) 159.53; More...

Intraday bias in USD/JPY remains neutral at this point as consolidation from 160.20 short term top is extending. Strong support could be seen from 38.2% retracement of 146.47 to 160.20 at 154.95 to bring recovery. But break of 160.20 is not envisaged for now. However, firm break of 154.95 will turn bias to the downside for deeper correction to 55 D EMA (now at 151.83).

In the bigger picture, current rise from 140.25 is seen as the third leg of the up trend from 127.20 (2023 low). Next target is 100% projection of 127.20 to 151.89 from 140.25 at 164.94. Outlook will remain bullish as long as 150.87 resistance turned support holds, even in case of deep pullback.

Yen is currently trading as the strongest currency for the day as the markets enter into US session. The earlier dip below 160 psychological support against Dollar spurred a wave of buying, propelling Yen sharply higher. However, subsequent trading has not shown clear follow-through momentum, indicating that the initial surge may have been more of a reactive spike.

Amidst speculation about market intervention by Japan, Masato Kanda, Vice Minister for International Affairs, did not confirm any direct actions but emphasized the government's concern over "excessive and abnormal FX fluctuations driven by speculation." He just reiterated Japan's readiness to "take appropriate measures as necessary."

From our perspective, the scale of today's Yen movement suggests it was more likely driven by traders locking in profits from their USD/JPY long positions after the pair hit 160 mark, rather than direct government intervention. After all, Confirmation of any official intervention will likely need to wait until the release of official data at the end of May.

In the broader currency market, New Zealand Dollar and Australian Dollar also show strength, following Yen's lead. Conversely, Dollar is the weakest performer, followed by Canadian and Euro, with British Pound and Swiss Franc holding middle ground.

Looking ahead to the upcoming Asian session, Australian Dollar will be in the spotlight with the release of local retail sales data and China's PMI figures. Technically, AUD/USD's fall from 0.6870 could have completed with three waves down to 0.6361. Further rise is now in favor to 0.6643 resistance first. Decisive break there will strengthen this bullish case and target 0.6870 next. Nevertheless, sustained trading below 55 D EMA will neutralize the near term bullishness and mix up the outlook.

In Europe, at the time of writing, FTSE is up 0.37%. DAX is flat. CAC is up 0.12%. UK 10-year yield is down -0.0284 at 4.298. Germany 10-year yield is down -0.052 at 2.527. Earlier in Asia, Japan was on holiday. Hong Kong HSI rose 0.54%. China Shanghai SSE rose 0.79%. Singapore Strait Times rose 0.06%.

Eurozone economic sentiment falls to 95.6, EU down to 96.2

Eurozone Economic Sentiment Indicator fell from 96.2 to 95.6 in April, below expectation of 96.9. Employment Expectations Indicator fell from 102.5 to 101.8. Economic Uncertainty Indicator fell from 19.3 to 18.8.

Eurozone industry confidence fell from -8.9 to -10.5. Services confidence fell from 6.4 to 6.0. Consumer confidence improved slightly from -14.9 to -14.7. Retail trade confidence fell from -6.0 to -6.8. Construction confidence fell from -5.6 to -6.0.

EU Economic Sentiment Indicator fell from 96.5 to 96.2. Employment Expectations Indicator fell from 102.2 to 101.7. Economic Uncertainty Indicator fell from 18.8 to 18.1.

For the largest EU economies, the ESI deteriorated significantly in France (-4.8) and more moderately in Italy (-1.3), while it improved markedly in Spain (+2.3), Germany (+1.5) and Poland (+1.5). The ESI remained broadly stable in the Netherlands (+0.3).

ECB's Wunsch: Successive rate cuts in Jun and Jul could trigger excessive repricing

ECB Governing Council member Pierre Wunsch expressed today that he is "very comfortable" with rate cut in June. He also anticipates that at least two rates cuts this year, "barring any bad news".

However, Wunsch was careful to temper expectations regarding the pace of future rate cuts, particularly stressing that a reduction in rates in July, following a potential June cut, is "not a done deal".

He highlighted the importance of "managing expectations," noting that too rapid a sequence of rate reductions could lead the markets to anticipate cuts at every ECB meeting. Such a perception could trigger an excessive repricing in the markets, which Wunsch views as problematic.

USD/JPY Mid-Day Outlook

Daily Pivots: (S1) 156.06; (P) 157.26; (R1) 159.53; More...

Intraday bias in USD/JPY remains neutral at this point as consolidation from 160.20 short term top is extending. Strong support could be seen from 38.2% retracement of 146.47 to 160.20 at 154.95 to bring recovery. But break of 160.20 is not envisaged for now. However, firm break of 154.95 will turn bias to the downside for deeper correction to 55 D EMA (now at 151.83).

In the bigger picture, current rise from 140.25 is seen as the third leg of the up trend from 127.20 (2023 low). Next target is 100% projection of 127.20 to 151.89 from 140.25 at 164.94. Outlook will remain bullish as long as 150.87 resistance turned support holds, even in case of deep pullback.

Economic Indicators Update

Market picture

The crypto market has lost 3.3% in the last 24 hours to $2.3 trillion. The last time this level of capitalisation was on 19th April. Most worrying is the reversal of the trend from up to down last Wednesday. If the market easily pulls back below the previous local lows ($2.2 trillion), the downtrend in the market will be confirmed.

Bitcoin is developing its retreat after failing to climb above the 50-day moving average last Tuesday. With the current price near $62.2K, the first cryptocurrency is trading at the lower end of its trading range, setting up for another test of $60K.

The ability to attract new buyers, as it has since early March, will revitalise the entire crypto market. However, it is more likely that there is a high overhang of selling right now, including miner stocks. From the perspective of 1-2 weeks, we see more chance of a dip into $52-55K than staying above $60K.

News background

According to Watcher Guru, BNY Mellon Bank has officially notified the US SEC about its investments in the spot bitcoin-ETF market.

Former Ethereum team advisor Steven Nerayoff said ETH had been secure since the Initial Coin Offering (ICO) and accused the network’s co-founders of fraud.

The UK’s National Crime Agency and police have been given powers to ‘seize, freeze and destroy’ cryptocurrency used by criminals.

According to CoinShares, institutional investors have significantly increased their investments in altcoins, and one of the beneficiaries is Solana. Altcoin market capitalisation is poised to reach new records, and in general, a ‘cryptocurrency summer’ is coming, according to Real Vision CEO Raul Pal.

‘95 per cent of blockchains are just junk’, said DFINITY president Dominic Williams. He noted the usefulness of the Bitcoin, Ethereum, Solana, and Avalanche blockchains. He called the Internet Computer Protocol (ICP) ‘the only third-generation network’ that could create a new on-chain era of online interactions.

US payment service Stripe announced the resumption of cryptocurrency transactions after a six-year hiatus.

The USD/JPY pair is hovering around 155.00 on Monday, having earlier touched a new 34-year peak at 160.00. Market rumours suggest that the Japanese authorities might have intervened in the currency market, although there has been no official confirmation. Today's market movement is particularly notable due to a public holiday in Japan, which has resulted in minimal market liquidity. This scenario made it relatively easy for investors to prompt significant changes in the quotes.

Last week, the Bank of Japan (BoJ) maintained its monetary policy foundation, keeping the interest rate steady at 0-0.1% per annum. Market participants were left disappointed, as they had anticipated a more pronounced reaction from the BoJ.

The primary driver of the yen's ongoing weakness is the significant discrepancy between the interest rates set by the BoJ and the US Federal Reserve. This interest rate gap exerts substantial pressure on the yen, making any actual intervention largely ineffective. The BoJ, aware of this reality, has thus far limited its actions to verbal interventions to influence the yen's value.

Technical analysis of USD/JPY

On the H4 chart of USD/JPY, a growth wave reaching the level of 160.16 was realised. The structure of the first impulse of decline to 154.70 is currently forming. Once this level is reached, a correction to 157.35 (testing from below) is anticipated, potentially followed by a new wave of decline towards 152.32, with the prospect of continuing the trend to 149.65. This scenario is technically supported by the MACD oscillator, which is positioned above zero at the highs but is expected to decline to new lows.

On the H1 chart, the upward growth wave to 160.16 has been completed. We are now observing the formation of the first impulse of the decline wave. The local target of this downside impulse at 155.15 has been achieved. We anticipate a corrective move to 157.35 (testing from below). Subsequently, the next phase of the downward trend to 154.65 is expected, which is the primary target. After completing this, a correction back to 157.35 may be considered. The Stochastic oscillator confirms this bearish outlook, with its signal line below 50 and pointing strictly downwards.

Eurozone Economic Sentiment Indicator fell from 96.2 to 95.6 in April, below expectation of 96.9. Employment Expectations Indicator fell from 102.5 to 101.8. Economic Uncertainty Indicator fell from 19.3 to 18.8.

Eurozone industry confidence fell from -8.9 to -10.5. Services confidence fell from 6.4 to 6.0. Consumer confidence improved slightly from -14.9 to -14.7. Retail trade confidence fell from -6.0 to -6.8. Construction confidence fell from -5.6 to -6.0.

EU Economic Sentiment Indicator fell from 96.5 to 96.2. Employment Expectations Indicator fell from 102.2 to 101.7. Economic Uncertainty Indicator fell from 18.8 to 18.1.

For the largest EU economies, the ESI deteriorated significantly in France (-4.8) and more moderately in Italy (-1.3), while it improved markedly in Spain (+2.3), Germany (+1.5) and Poland (+1.5). The ESI remained broadly stable in the Netherlands (+0.3).

Full Eurozone ESI release here.

ECB Governing Council member Pierre Wunsch expressed today that he is "very comfortable" with rate cut in June. He also anticipates that at least two rates cuts this year, "barring any bad news".

However, Wunsch was careful to temper expectations regarding the pace of future rate cuts, particularly stressing that a reduction in rates in July, following a potential June cut, is "not a done deal".

He highlighted the importance of "managing expectations," noting that too rapid a sequence of rate reductions could lead the markets to anticipate cuts at every ECB meeting. Such a perception could trigger an excessive repricing in the markets, which Wunsch views as problematic.

Despite the fact that today is a holiday in Japan, the foreign exchange market is experiencing extreme volatility — wide candles are forming on the USD/JPY chart, and the rate briefly exceeded the psychological level of 160 yen per dollar, reaching a new high in 34 years.

The weakening of the yen in the first hours of trading occurred against the background of the fact that:

→ On Friday, the Bank of Japan decided to leave interest rates at the same level = 0.1%.

→ At the same time, market participants did not hear clear signals from the Bank of Japan that the weakening yen would be supported.

→ On Wednesday, May 1, the Fed will announce its decision on the interest rate. It is also expected to remain unchanged at 5.5%, highlighting the difference in monetary policy between Japan and the United States.

However, shortly after the yen surpassed the psychological level of 160.00, USD/JPY fell sharply to 155.50 and below — traders, according to Reuters, saw signs of intervention from Japanese financial authorities after a 13% increase since the beginning of the year.

Let us recall that Tokyo previously intervened in the foreign exchange market in September and October 2022, when the US dollar exchange rate was about 146.00 and 152.00 yen, respectively.

Technical analysis of the 4-hour USD/JPY chart shows that:

→ the price has exceeded the upper limit of the ascending channel (shown in blue);

→ the price has exceeded the upper limit of a steeper ascending channel, which originates in March (shown in black);

→ the RSI indicator exceeded the value = 93, indicating that the market was extremely overbought.

Having reached the lower black line, the USD/JPY rate bounced from it to the black median line — thus, a decrease of 2.5% took only 1 hour.

If official statements follow soon, they may confirm the assumption that the 160 yen per US dollar level is a tolerance limit that Tokyo cannot afford to allow to be breached. Such statements have the potential to change the balance of power in the market, cooling the ardor of the bulls.

It is possible that the peak reached this morning will be a peak that can hold for many months.

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USDJPY cracked psychological 160 barrier and hit new multi-decade high early Monday, with subsequent sharp pullback to 155.00 zone on suspected intervention.

Fresh weakness cracked pivotal 155 support area (Friday’s low / 10DMA / Fibo 38.2% of 146.448/160.19) but so far without sustained break lower, with close above this levels to mark a healthy correction and keep larger bulls intact for fresh push higher.

However, risk of deeper pullback exists, as daily indicators are in steep decline and RSI / Stochastic emerged from overbought zone and threats of further intervention by Japan’s authorities.

Extended dips below 155.00 should find solid ground above broken pivotal barrier, now acting as very significant support (152.60, broken Fibo 38.2% of 277.65/75.55) to keep broader bullish bias, with monthly close above this level, needed to confirm.

Conversely, firm break here would signal temporary top and open way for deeper correction.

Res: 156.89; 157.23; 157.73; 158.43.
Sup: 155.00; 154.51; 153.80; 153.34.

• USD/JPY extended its rally to hit 159.60 key long-term resistance (also the April 1990 secular swing high).
• Today’s Asian session’s swift upmove in USD/JPY has led to an increase in its volatility condition which increases the risk of FX intervention.
• Abrupt intraday movement in USD/JPY that wiped out earlier intraday gains has the hallmark of a suspected FX intervention.

Last Friday (26 April) price actions of the USD/JPY continued its march higher to close the US session with a new 34-year high at 158.35 (+1.7% daily gain) in light of a stubborn inflationary trend in the US as the core PCE price index (excluding food and energy) for March stood unchanged at 2.8% y/y and surpassed expectations of 2.6% y/y that put the highly anticipated US Federal Reserve’s dovish pivot narrative at the start of the year in great jeopardy.

On the flip side, the Bank of Japan’s recently concluded monetary policy decision last Friday lacked the “decisive punch”  to shore up the persistent JPY weakness trend in terms of communications as BoJ Governor Ueda remarked in the press conference that the weak JPY has not had a big impact of underlying inflation in Japan (via imported inflation) which has reduced the odds of an interest rate hike in the next BoJ’s meeting in July.

159.60 key long-term resistance has been reached with increased volatility

Fig 1: USD/JPY major trend as of 29 Apr 2024 (Source: TradingView, click to enlarge chart)

Recently, Japanese key Ministry of Finance (MoF) officials have highlighted that they are watching the FX market with a sense of “urgency” and stressed abrupt market movements as their key concerns in light of potential interventions to pause the JPY weakness.

An abrupt movement can be termed as an increase in volatility. In today’s early Asian session, the USD/JPY has jumped up by +1.5% (230 pips) to hit an intraday high of 160.23 within 3.5 hours from the start of the session.

This latest set of movements seen in the USD/JPY has caused its 4-week moving average of its weekly range indicator (a measurement of volatility, considering the highest and lowest price points rather than closing levels) has jump up significantly from 1.43 printed last week to a current intra-week value of 3.19. (see Fig 1).

Therefore, an increase in the volatility condition of USD/JPY has increased the risk of FX intervention.

Large speculative players’ net bearish positioning on JPY hit an extreme level

Fig 2: Commitments of Trader large speculators’ net positioning in JPY futures as of 22 April 2024 (Source: Macro Micro, click to enlarge chart)

Based on the latest data Commitments of Traders data as of 22 April 2024 (compiled by Macro Micro), the aggregate net bearish open positions of large speculators in the JPY futures market in the US (after offsetting the aggregate positions of large commercial hedgers) have increased to -359,063 contracts (net short), its lowest level in almost 17 years with -374,536 contracts recorded on 25 June 2007 (see Fig 2).

Since large speculators have committed a relatively high amount of net bearish open positioning on JPY via the futures market, a real FX Intervention by Japanese authorities at this juncture may trigger a “panic” short covering of such leveraged short positions which in turn might cascade into an abrupt liquidity squeeze and negative feedback loop movement into the USD/JPY at least in the short-term horizon.

Wild intraday swings below 159.60 key long-term pivotal resistance

Fig 3: USD/JPY short-term trend as of 29 Apr 2024 (Source: TradingView, click to enlarge chart)

After skyrocketing to today’s Asian session intraday high of 160.23, it has erased its intraday gains within one hour to record a current intraday loss of -0.87% (-3.2% from intraday high to low) at this time of writing.

These abrupt short-term movements have given rise to the suspected footprints of actual FX interventions by Japanese authorities, so far, no official confirmations from MoF due to a public holiday in Japan today.

Watch the 158.35 key short-term pivotal support and break below 154.70 near-term support may trigger a further potential short-term downward spiral to expose the next intermediate supports at 153.70 (also the 20-day moving average) and 151.60 (50-day moving average) (see Fig 3).

On the other hand, a clearance above 158.35 negates the bearish tone for a retest on the 159.60/160.30 long-term pivotal resistance area.

• EURUSD rebounds from a five-month bottom
• But oscillators suggest that the bears retain control

EURUSD came under severe selling pressure in the aftermath of a hotter-than-expected inflation report on April 10, posting a fresh 2024 low of 1.0600. Although the pair has been regaining ground since then, the momentum indicators are still tilted to the downside.

Should the rebound resume, the recent resistance of 1.0752 could prove to be the first barrier for the price to overcome. Conquering this barricade, the bulls could attack 1.0795, a region that acted both as support and resistance throughout 2024 and overlaps with the 200-day simple moving average (SMA). A violation of that zone could set the stage for the September high of 1.0884.

Alternatively, a downside move could meet immediate support at the February low of 1.0694. Sliding beneath that floor, the price could test the recent support of 1.0673. Even lower, the five-month bottom of 1.0600 could come under scrutiny.

In brief, EURUSD has been in a recovery mode over the past few sessions, but the momentum indicators are suggesting that bears are still holding the upper hand. Hence, a break above the 200-day SMA is needed for the short-term picture to improve.