USD/JPY To Surge Sharply, Heads Towards 117.20

ByBarbara Byrne

Oct 4, 2021

The USD/JPY is considered as being on the verge of creating a major foundation. If verified above 112.40, this might trigger 114.25/55 firstly ahead of 117.20 and upwards, in the long run, Credit Suisse analysts predict. The USD/JPY has risen sharply in recent days, approaching long-term resistance at the 2019 and 2020 peaks of 112.40 and 112.23, correspondingly.

Beyond this level, which is now the base case, a multi-year base for a progressive step higher would be established, with preliminary opposition seen at 114.25/55 in front of the long-term downwards trend from April 1990, which is presently at 117.20, and initial opposition seen at 114.25/55. Strength at 110.00 should now theoretically hold, but merely a retest of 109.11 would be required to put a stop to quick base speculation.

Overview of the Technical Details


As European merchants prepared for Monday’s opening, the USD/JPY teased 111.00, with an intraday high of 111.11. The risk gauge pair had earlier fallen as a result of reduced US Treasury yields, which weighed on the US dollar, but the recent comeback could be attributed to the change in attitude. Inability to sustain a convincing breach over the 112.00 mark, combined with overbought RSI conditions, triggered the latest USD/JPY decline, which is approaching August highs of 110.80.

Outline of the Fundamentals

The restriction of Evergrande from dealing in Hong Kong, as well as the United States’ displeasure with China’s actions around Taiwan, have recently affected the market’s attitude. According to sources cited by CNBC news, “US Trade Rep Katherine Tai will suggest that China has not cooperated with the stage one trade agreement in her statement on Monday.” 

Moreover, suggestions that the financially troubled Chinese corporation is considering a $5.00 billion asset sale lend momentum to the risk-off sentiment, which in turn supports interest in the US dollar as a relatively secure currency. However, the Federal Reserve’s trimming program is becoming more forceful, which has assisted the US Treasury yields in reversing a three-day downward trend. The recent setback could be attributed to higher inflation and consumer confidence data in the United States.

Given the possibility of reducing COVID-19 concerns in the United States and Japan, as well as the anticipation of a multibillion-dollar Japanese plan and a US infrastructure investment bill, the USD/JPY swings are called into question. Amid these maneuvers, US market futures show modest losses, whereas Japan’s Nikkei 225 index declines more than 1.20 percent. The Nonfarm Payrolls (NFP) report for the United States will be closely scrutinized in light of the Fed’s trimming and rate rise worries. The news linked to China’s economic shift, Japanese politics, and the Evergrande will also be crucial. In the short term, August US Factory Orders, expected to rise by 0.9 percent versus 0.4 percent, may provide intraday cues.

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