USD/JPY: Target Values Obtained through Pattern Analysis
2023-02-21
■ Will the March trend of USD depreciation and JPY appreciation continue? A crucial period for the financial policies of Japan and the US.
■ USD/JPY will test its support level at 127 JPY, but the trend of USD strength and JPY weakness may come to an end at 139 JPY, which is worth paying attention to.
The USD/JPY in February ended the trading session at a level of 130.07 JPY per USD, which was higher than the level at the beginning of the month and marked an uptrend in the past three months. As the monetary policies of Japan and the US reach a turning point, the exchange rate of USD/JPY in the European and American markets rebounded to 135 JPY per USD on the 17th, reaching a new high in about two months. The market trends can be divided into two categories: when the trend continues and when the trend reverses. It remains to be seen whether the trend of USD depreciation and JPY appreciation in March will continue. Target values for USD/JPY are predicted through pattern analysis of the price movements.
The period from March to May will be crucial for the direction of USD/JPY for the second half of the year. If we consider the pattern after May 2022, which clearly surpassed the 2015 high of 125.85 JPY, as a "head and shoulders" pattern, the low points of May 24th and January 16th at 126.35 and 127.21 JPY per USD, respectively, will be the low price targets, while the high price target will be 139.39 JPY per USD, which was the high point in July 2022. The chart positions, such as 139.58 JPY, which converge at the same level and are half the return of the downtrend since October last year, are considered to be a crucial turning point that could change the basic tone of USD/JPY.
On the 24th, the House of Representatives will hold a hearing and questioning for Mr. Ueda, a former member of the Bank of Japan's policy board, who has become a candidate for the next governor of the Bank of Japan. As a theoretician, few people expect him to adopt a loose monetary policy prematurely. As the term of the current Bank of Japan Governor, Mr. Kuroda, expires on April 8th, there are also views that the monetary policy meeting of the Bank of Japan on March 9th and 10th will be sluggish. In addition, there is uncertainty about the revision of the joint statement (agreement) between the government and the Bank of Japan, and it is difficult for the JPY to appreciate at present. On the other hand, the Federal Open Market Committee (FOMC) of the US is expected to raise interest rates by 25 basis points at the meetings in March and May, respectively. The meeting in March will reveal the prospects for the policy interest rate and provide clues for the direction after May. If the policy interest rate (terminal rate) ultimately increases to above 5.25-5.50%, USD/JPY may find upward space due to the interest rate differential between Japan and the US.